Correlation Between Gafisa SA and DR Horton

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

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

Diversification Opportunities for Gafisa SA and DR Horton

0.65

Correlation Coefficient

Gafisa SA  DR Horton

Poor diversification

The 3 months correlation between Gafisa and D1HI34 is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Gafisa SA and DR Horton in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DR Horton and Gafisa SA 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 Gafisa SA are associated (or correlated) with DR Horton. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DR Horton has no effect on the direction of Gafisa SA i.e., Gafisa SA and DR Horton go up and down completely randomly.

Pair Corralation between Gafisa SA and DR Horton

Assuming the 90 days trading horizon Gafisa SA is expected to under-perform the DR Horton. In addition to that, Gafisa SA is 2.14 times more volatile than DR Horton. It trades about -0.19 of its total potential returns per unit of risk. DR Horton is currently generating about -0.03 per unit of volatility. If you would invest  105,800  in DR Horton on September 4, 2024 and sell it today you would lose (4,600) from holding DR Horton or give up 4.35% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	96.83%
Values	Daily Returns

Gafisa SA  vs.  DR Horton

Gafisa SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gafisa SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

DR Horton

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Gafisa SA and DR Horton

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

The idea behind Gafisa SA and DR Horton 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.