Correlation Between Cintas and Landsea Homes

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

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

Diversification Opportunities for Cintas and Landsea Homes

0.14

Correlation Coefficient

Cintas  Landsea Homes

Average diversification

The 3 months correlation between Cintas and Landsea is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Cintas and Landsea Homes Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Landsea Homes Corp and Cintas 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 Cintas are associated (or correlated) with Landsea Homes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Landsea Homes Corp has no effect on the direction of Cintas i.e., Cintas and Landsea Homes go up and down completely randomly.

Pair Corralation between Cintas and Landsea Homes

Given the investment horizon of 90 days Cintas is expected to generate 0.29 times more return on investment than Landsea Homes. However, Cintas is 3.4 times less risky than Landsea Homes. It trades about 0.26 of its potential returns per unit of risk. Landsea Homes Corp is currently generating about -0.01 per unit of risk. If you would invest  21,150  in Cintas on August 13, 2024 and sell it today you would earn a total of  1,422  from holding Cintas or generate 6.72% return on investment over 90 days.

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

Cintas  vs.  Landsea Homes Corp

Cintas

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Cintas are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Cintas unveiled solid returns over the last few months and may actually be approaching a breakup point.

Landsea Homes Corp

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Landsea Homes Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat fragile technical and fundamental indicators, Landsea Homes may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Cintas and Landsea Homes

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

The idea behind Cintas and Landsea Homes Corp 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.