Correlation Between Sekisui House and LENNAR P

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

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

Diversification Opportunities for Sekisui House and LENNAR P

0.32

Correlation Coefficient

Sekisui House  LENNAR P

Weak diversification

The 3 months correlation between Sekisui and LENNAR is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Sekisui House and LENNAR P B in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LENNAR P B and Sekisui House 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 Sekisui House are associated (or correlated) with LENNAR P. 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 B has no effect on the direction of Sekisui House i.e., Sekisui House and LENNAR P go up and down completely randomly.

Pair Corralation between Sekisui House and LENNAR P

Assuming the 90 days trading horizon Sekisui House is expected to generate 0.68 times more return on investment than LENNAR P. However, Sekisui House is 1.48 times less risky than LENNAR P. It trades about -0.13 of its potential returns per unit of risk. LENNAR P B is currently generating about -0.11 per unit of risk. If you would invest  2,500  in Sekisui House on September 23, 2024 and sell it today you would lose (300.00) from holding Sekisui House or give up 12.0% of portfolio value over 90 days.

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

Sekisui House  vs.  LENNAR P B

Sekisui House

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sekisui House has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's technical indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

LENNAR P B

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LENNAR P B has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Sekisui House and LENNAR P

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

The idea behind Sekisui House and LENNAR P B 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.