Correlation Between LENNAR and Papaya Growth

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

Diversification Opportunities for LENNAR and Papaya Growth

0.0

Correlation Coefficient

LENNAR  Papaya Growth

Pay attention - limited upside

The 3 months correlation between LENNAR and Papaya is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding LENNAR P 525 and Papaya Growth Opportunity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Papaya Growth Opportunity 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 Papaya Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Papaya Growth Opportunity has no effect on the direction of LENNAR i.e., LENNAR and Papaya Growth go up and down completely randomly.

Pair Corralation between LENNAR and Papaya Growth

Assuming the 90 days trading horizon LENNAR P 525 is expected to under-perform the Papaya Growth. But the bond apears to be less risky and, when comparing its historical volatility, LENNAR P 525 is 1.93 times less risky than Papaya Growth. The bond trades about -0.06 of its potential returns per unit of risk. The Papaya Growth Opportunity is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  1,101  in Papaya Growth Opportunity on September 25, 2024 and sell it today you would earn a total of  18.00  from holding Papaya Growth Opportunity or generate 1.63% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

LENNAR P 525  vs.  Papaya Growth Opportunity

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

Papaya Growth Opportunity

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Papaya Growth Opportunity are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Papaya Growth is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with LENNAR and Papaya Growth

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

The idea behind LENNAR P 525 and Papaya Growth Opportunity 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.