Correlation Between LENNAR and Fidus Investment

Can any of the company-specific risk be diversified away by investing in both LENNAR and Fidus Investment 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 Fidus Investment 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 Fidus Investment Corp, you can compare the effects of market volatilities on LENNAR and Fidus Investment 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 Fidus Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of LENNAR and Fidus Investment.

Diversification Opportunities for LENNAR and Fidus Investment

-0.43

Correlation Coefficient

LENNAR  Fidus Investment

Very good diversification

The 3 months correlation between LENNAR and Fidus is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding LENNAR P 525 and Fidus Investment Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidus Investment Corp 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 Fidus Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidus Investment Corp has no effect on the direction of LENNAR i.e., LENNAR and Fidus Investment go up and down completely randomly.

Pair Corralation between LENNAR and Fidus Investment

Assuming the 90 days trading horizon LENNAR P 525 is expected to under-perform the Fidus Investment. But the bond apears to be less risky and, when comparing its historical volatility, LENNAR P 525 is 1.96 times less risky than Fidus Investment. The bond trades about -0.01 of its potential returns per unit of risk. The Fidus Investment Corp is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  1,505  in Fidus Investment Corp on September 24, 2024 and sell it today you would earn a total of  552.00  from holding Fidus Investment Corp or generate 36.68% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	93.17%
Values	Daily Returns

LENNAR P 525  vs.  Fidus Investment Corp

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 newest stock price disturbance, may contribute to short-term losses for the investors.

Fidus Investment Corp

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Fidus Investment Corp are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent basic indicators, Fidus Investment may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with LENNAR and Fidus Investment

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

The idea behind LENNAR P 525 and Fidus Investment Corp 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.