Correlation Between Crown Holdings and Hovnanian Enterprises

Can any of the company-specific risk be diversified away by investing in both Crown Holdings and Hovnanian Enterprises 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 Crown Holdings and Hovnanian Enterprises into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Crown Holdings and Hovnanian Enterprises PFD, you can compare the effects of market volatilities on Crown Holdings and Hovnanian Enterprises 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 Crown Holdings with a short position of Hovnanian Enterprises. Check out your portfolio center. Please also check ongoing floating volatility patterns of Crown Holdings and Hovnanian Enterprises.

Diversification Opportunities for Crown Holdings and Hovnanian Enterprises

-0.63

Correlation Coefficient

Crown Holdings  Hovnanian Enterprises

Excellent diversification

The 3 months correlation between Crown and Hovnanian is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Crown Holdings and Hovnanian Enterprises PFD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hovnanian Enterprises PFD and Crown Holdings 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 Crown Holdings are associated (or correlated) with Hovnanian Enterprises. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hovnanian Enterprises PFD has no effect on the direction of Crown Holdings i.e., Crown Holdings and Hovnanian Enterprises go up and down completely randomly.

Pair Corralation between Crown Holdings and Hovnanian Enterprises

Considering the 90-day investment horizon Crown Holdings is expected to under-perform the Hovnanian Enterprises. In addition to that, Crown Holdings is 2.5 times more volatile than Hovnanian Enterprises PFD. It trades about -0.18 of its total potential returns per unit of risk. Hovnanian Enterprises PFD is currently generating about 0.04 per unit of volatility. If you would invest  1,751  in Hovnanian Enterprises PFD on September 22, 2024 and sell it today you would earn a total of  18.00  from holding Hovnanian Enterprises PFD or generate 1.03% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Crown Holdings  vs.  Hovnanian Enterprises PFD

Crown Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Crown Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's fundamental indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Hovnanian Enterprises PFD

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Hovnanian Enterprises PFD are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Hovnanian Enterprises is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Crown Holdings and Hovnanian Enterprises

The main advantage of trading using opposite Crown Holdings and Hovnanian Enterprises positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Crown Holdings position performs unexpectedly, Hovnanian Enterprises 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 Hovnanian Enterprises will offset losses from the drop in Hovnanian Enterprises' long position.

The idea behind Crown Holdings and Hovnanian Enterprises PFD 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.