Correlation Between Beazer Homes and Amer Sports

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

By analyzing existing cross correlation between Beazer Homes USA and Amer Sports, you can compare the effects of market volatilities on Beazer Homes and Amer Sports 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 Beazer Homes with a short position of Amer Sports. Check out your portfolio center. Please also check ongoing floating volatility patterns of Beazer Homes and Amer Sports.

Diversification Opportunities for Beazer Homes and Amer Sports

0.76

Correlation Coefficient

Beazer Homes  Amer Sports

Poor diversification

The 3 months correlation between Beazer and Amer is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Beazer Homes USA and Amer Sports in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amer Sports and Beazer Homes 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 Beazer Homes USA are associated (or correlated) with Amer Sports. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amer Sports has no effect on the direction of Beazer Homes i.e., Beazer Homes and Amer Sports go up and down completely randomly.

Pair Corralation between Beazer Homes and Amer Sports

Considering the 90-day investment horizon Beazer Homes USA is expected to under-perform the Amer Sports. But the stock apears to be less risky and, when comparing its historical volatility, Beazer Homes USA is 1.08 times less risky than Amer Sports. The stock trades about -0.05 of its potential returns per unit of risk. The Amer Sports is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  1,596  in Amer Sports on March 12, 2024 and sell it today you would lose (128.00) from holding Amer Sports or give up 8.02% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Beazer Homes USA  vs.  Amer Sports

Beazer Homes USA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Beazer Homes USA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest inconsistent performance, the Stock's basic indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Amer Sports

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Amer Sports has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Amer Sports is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Beazer Homes and Amer Sports

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

The idea behind Beazer Homes USA and Amer Sports 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.