Correlation Between PulteGroup and AXT

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

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

Diversification Opportunities for PulteGroup and AXT

0.6

Correlation Coefficient

PulteGroup  AXT

Poor diversification

The 3 months correlation between PulteGroup and AXT is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding PulteGroup and AXT Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AXT Inc and PulteGroup 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 PulteGroup are associated (or correlated) with AXT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AXT Inc has no effect on the direction of PulteGroup i.e., PulteGroup and AXT go up and down completely randomly.

Pair Corralation between PulteGroup and AXT

Considering the 90-day investment horizon PulteGroup is expected to generate 6.26 times less return on investment than AXT. But when comparing it to its historical volatility, PulteGroup is 6.5 times less risky than AXT. It trades about 0.11 of its potential returns per unit of risk. AXT Inc is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  247.00  in AXT Inc on February 11, 2024 and sell it today you would earn a total of  114.00  from holding AXT Inc or generate 46.15% return on investment over 90 days.

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

PulteGroup  vs.  AXT Inc

PulteGroup

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in PulteGroup are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical indicators, PulteGroup may actually be approaching a critical reversion point that can send shares even higher in June 2024.

AXT Inc

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in AXT Inc are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak basic indicators, AXT demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PulteGroup and AXT

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

The idea behind PulteGroup and AXT Inc 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.