Correlation Between Century Communities and Skyline

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

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

Diversification Opportunities for Century Communities and Skyline

-0.17

Correlation Coefficient

Century Communities  Skyline

Good diversification

The 3 months correlation between Century and Skyline is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Century Communities and Skyline in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Skyline 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 Skyline. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Skyline has no effect on the direction of Century Communities i.e., Century Communities and Skyline go up and down completely randomly.

Pair Corralation between Century Communities and Skyline

Considering the 90-day investment horizon Century Communities is expected to generate 7.37 times less return on investment than Skyline. In addition to that, Century Communities is 1.57 times more volatile than Skyline. It trades about 0.04 of its total potential returns per unit of risk. Skyline is currently generating about 0.44 per unit of volatility. If you would invest  8,944  in Skyline on August 30, 2024 and sell it today you would earn a total of  1,429  from holding Skyline or generate 15.98% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.65%
Values	Daily Returns

Century Communities  vs.  Skyline

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 inconsistent 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.

Skyline

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Skyline are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating forward-looking signals, Skyline may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Century Communities and Skyline

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

The idea behind Century Communities and Skyline 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.