Correlation Between LENNAR and Cannae Holdings

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

By analyzing existing cross correlation between LENNAR P 5 and Cannae Holdings, you can compare the effects of market volatilities on LENNAR and Cannae Holdings 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 Cannae Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of LENNAR and Cannae Holdings.

Diversification Opportunities for LENNAR and Cannae Holdings

-0.29

Correlation Coefficient

LENNAR  Cannae Holdings

Very good diversification

The 3 months correlation between LENNAR and Cannae is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding LENNAR P 5 and Cannae Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cannae Holdings 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 5 are associated (or correlated) with Cannae Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cannae Holdings has no effect on the direction of LENNAR i.e., LENNAR and Cannae Holdings go up and down completely randomly.

Pair Corralation between LENNAR and Cannae Holdings

Assuming the 90 days trading horizon LENNAR is expected to generate 2.6 times less return on investment than Cannae Holdings. But when comparing it to its historical volatility, LENNAR P 5 is 3.23 times less risky than Cannae Holdings. It trades about 0.01 of its potential returns per unit of risk. Cannae Holdings is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  2,020  in Cannae Holdings on September 24, 2024 and sell it today you would lose (30.00) from holding Cannae Holdings or give up 1.49% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.58%
Values	Daily Returns

LENNAR P 5  vs.  Cannae Holdings

LENNAR P 5

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LENNAR P 5 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.

Cannae Holdings

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Cannae Holdings are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Cannae Holdings is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with LENNAR and Cannae Holdings

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

The idea behind LENNAR P 5 and Cannae Holdings 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.