Correlation Between Bluerock Homes and LENNAR

Can any of the company-specific risk be diversified away by investing in both Bluerock Homes and LENNAR at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Bluerock Homes and LENNAR into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Bluerock Homes Trust and LENNAR P 525, you can compare the effects of market volatilities on Bluerock Homes and LENNAR and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Bluerock Homes with a short position of LENNAR. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bluerock Homes and LENNAR.

Diversification Opportunities for Bluerock Homes and LENNAR

0.33

Correlation Coefficient

Bluerock Homes  LENNAR

Weak diversification

The 3 months correlation between Bluerock and LENNAR is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Bluerock Homes Trust and LENNAR P 525 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LENNAR P 525 and Bluerock Homes is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Bluerock Homes Trust are associated (or correlated) with LENNAR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LENNAR P 525 has no effect on the direction of Bluerock Homes i.e., Bluerock Homes and LENNAR go up and down completely randomly.

Pair Corralation between Bluerock Homes and LENNAR

Considering the 90-day investment horizon Bluerock Homes Trust is expected to under-perform the LENNAR. In addition to that, Bluerock Homes is 7.99 times more volatile than LENNAR P 525. It trades about -0.03 of its total potential returns per unit of risk. LENNAR P 525 is currently generating about -0.07 per unit of volatility. If you would invest  10,095  in LENNAR P 525 on September 24, 2024 and sell it today you would lose (105.00) from holding LENNAR P 525 or give up 1.04% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	92.31%
Values	Daily Returns

Bluerock Homes Trust  vs.  LENNAR P 525

Bluerock Homes Trust

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bluerock Homes Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical indicators, Bluerock Homes is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

LENNAR P 525

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LENNAR P 525 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, LENNAR is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Bluerock Homes and LENNAR

The main advantage of trading using opposite Bluerock Homes and LENNAR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bluerock Homes position performs unexpectedly, LENNAR can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in LENNAR will offset losses from the drop in LENNAR's long position.

The idea behind Bluerock Homes Trust and LENNAR P 525 pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.