Correlation Between LENNAR and Bluerock Homes

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

By analyzing existing cross correlation between LENNAR P 525 and Bluerock Homes Trust, you can compare the effects of market volatilities on LENNAR and Bluerock Homes 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 LENNAR with a short position of Bluerock Homes. Check out your portfolio center. Please also check ongoing floating volatility patterns of LENNAR and Bluerock Homes.

Diversification Opportunities for LENNAR and Bluerock Homes

0.69

Correlation Coefficient

LENNAR  Bluerock Homes

Poor diversification

The 3 months correlation between LENNAR and Bluerock is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding LENNAR P 525 and Bluerock Homes Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bluerock Homes Trust and LENNAR 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 LENNAR P 525 are associated (or correlated) with Bluerock Homes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bluerock Homes Trust has no effect on the direction of LENNAR i.e., LENNAR and Bluerock Homes go up and down completely randomly.

Pair Corralation between LENNAR and Bluerock Homes

Assuming the 90 days trading horizon LENNAR P 525 is expected to generate 0.12 times more return on investment than Bluerock Homes. However, LENNAR P 525 is 8.02 times less risky than Bluerock Homes. It trades about -0.06 of its potential returns per unit of risk. Bluerock Homes Trust is currently generating about -0.05 per unit of risk. If you would invest  10,121  in LENNAR P 525 on September 25, 2024 and sell it today you would lose (90.00) from holding LENNAR P 525 or give up 0.89% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.24%
Values	Daily Returns

LENNAR P 525  vs.  Bluerock Homes Trust

LENNAR P 525

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LENNAR P 525 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 current stock price disturbance, may contribute to short-term losses for the investors.

Bluerock Homes Trust

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bluerock Homes Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical indicators, Bluerock Homes is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with LENNAR and Bluerock Homes

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

The idea behind LENNAR P 525 and Bluerock Homes Trust 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.