Correlation Between Cannae Holdings and LENNAR

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

By analyzing existing cross correlation between Cannae Holdings and LENNAR P 5, you can compare the effects of market volatilities on Cannae Holdings 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 Cannae Holdings with a short position of LENNAR. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cannae Holdings and LENNAR.

Diversification Opportunities for Cannae Holdings and LENNAR

-0.29

Correlation Coefficient

Cannae Holdings  LENNAR

Very good diversification

The 3 months correlation between Cannae and LENNAR is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Cannae Holdings and LENNAR P 5 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LENNAR P 5 and Cannae 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 Cannae Holdings 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 5 has no effect on the direction of Cannae Holdings i.e., Cannae Holdings and LENNAR go up and down completely randomly.

Pair Corralation between Cannae Holdings and LENNAR

Given the investment horizon of 90 days Cannae Holdings is expected to generate 7.06 times more return on investment than LENNAR. However, Cannae Holdings is 7.06 times more volatile than LENNAR P 5. It trades about 0.05 of its potential returns per unit of risk. LENNAR P 5 is currently generating about -0.15 per unit of risk. If you would invest  1,897  in Cannae Holdings on September 24, 2024 and sell it today you would earn a total of  83.00  from holding Cannae Holdings or generate 4.38% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.38%
Values	Daily Returns

Cannae Holdings  vs.  LENNAR P 5

Cannae Holdings

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Cannae Holdings are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Cannae Holdings is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

LENNAR P 5

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LENNAR P 5 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 latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Cannae Holdings and LENNAR

The main advantage of trading using opposite Cannae Holdings and LENNAR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cannae Holdings 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 Cannae Holdings and LENNAR P 5 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.

Check out your portfolio center.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.