Correlation Between City Developments and Green Brick
Can any of the company-specific risk be diversified away by investing in both City Developments and Green Brick 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 City Developments and Green Brick into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between City Developments Limited and Green Brick Partners, you can compare the effects of market volatilities on City Developments and Green Brick 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 City Developments with a short position of Green Brick. Check out your portfolio center. Please also check ongoing floating volatility patterns of City Developments and Green Brick.
Diversification Opportunities for City Developments and Green Brick
-0.56 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between City and Green is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding City Developments Limited and Green Brick Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Green Brick Partners and City Developments 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 City Developments Limited are associated (or correlated) with Green Brick. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Green Brick Partners has no effect on the direction of City Developments i.e., City Developments and Green Brick go up and down completely randomly.
Pair Corralation between City Developments and Green Brick
Assuming the 90 days horizon City Developments Limited is expected to generate 0.12 times more return on investment than Green Brick. However, City Developments Limited is 8.1 times less risky than Green Brick. It trades about 0.3 of its potential returns per unit of risk. Green Brick Partners is currently generating about -0.2 per unit of risk. If you would invest 436.00 in City Developments Limited on January 26, 2024 and sell it today you would earn a total of 6.00 from holding City Developments Limited or generate 1.38% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
City Developments Limited vs. Green Brick Partners
Performance |
| Timeline |
| City Developments |
| Green Brick Partners |
City Developments and Green Brick Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with City Developments and Green Brick
The main advantage of trading using opposite City Developments and Green Brick positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if City Developments position performs unexpectedly, Green Brick 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 Green Brick will offset losses from the drop in Green Brick's long position.The idea behind City Developments Limited and Green Brick Partners 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.| Green Brick vs. Taylor Morn Home | Green Brick vs. Century Communities | Green Brick vs. Beazer Homes USA | Green Brick vs. Meritage |
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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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