Correlation Between Century Communities and On Holding

Can any of the company-specific risk be diversified away by investing in both Century Communities and On Holding 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 Century Communities and On Holding into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Century Communities and On Holding, you can compare the effects of market volatilities on Century Communities and On Holding 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 Century Communities with a short position of On Holding. Check out your portfolio center. Please also check ongoing floating volatility patterns of Century Communities and On Holding.

Diversification Opportunities for Century Communities and On Holding

-0.35

Correlation Coefficient

Century Communities  On Holding

Very good diversification

The 3 months correlation between Century and ONON is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Century Communities and On Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on On Holding and Century Communities 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 Century Communities are associated (or correlated) with On Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of On Holding has no effect on the direction of Century Communities i.e., Century Communities and On Holding go up and down completely randomly.

Pair Corralation between Century Communities and On Holding

Considering the 90-day investment horizon Century Communities is expected to under-perform the On Holding. In addition to that, Century Communities is 1.0 times more volatile than On Holding. It trades about -0.06 of its total potential returns per unit of risk. On Holding is currently generating about 0.16 per unit of volatility. If you would invest  4,698  in On Holding on August 30, 2024 and sell it today you would earn a total of  1,092  from holding On Holding or generate 23.24% return on investment over 90 days.

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

Century Communities  vs.  On Holding

Century Communities

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Century Communities has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

On Holding

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in On Holding are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, On Holding displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Century Communities and On Holding

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

The idea behind Century Communities and On Holding 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.