Correlation Between Beazer Homes and Commonwealth Bank

Can any of the company-specific risk be diversified away by investing in both Beazer Homes and Commonwealth Bank 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 Commonwealth Bank 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 Commonwealth Bank of, you can compare the effects of market volatilities on Beazer Homes and Commonwealth Bank 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 Commonwealth Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Beazer Homes and Commonwealth Bank.

Diversification Opportunities for Beazer Homes and Commonwealth Bank

0.62

Correlation Coefficient

Beazer Homes  Commonwealth Bank

Poor diversification

The 3 months correlation between Beazer and Commonwealth is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Beazer Homes USA and Commonwealth Bank of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Commonwealth Bank 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 Commonwealth Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Commonwealth Bank has no effect on the direction of Beazer Homes i.e., Beazer Homes and Commonwealth Bank go up and down completely randomly.

Pair Corralation between Beazer Homes and Commonwealth Bank

Assuming the 90 days trading horizon Beazer Homes is expected to generate 1.07 times less return on investment than Commonwealth Bank. In addition to that, Beazer Homes is 2.06 times more volatile than Commonwealth Bank of. It trades about 0.07 of its total potential returns per unit of risk. Commonwealth Bank of is currently generating about 0.15 per unit of volatility. If you would invest  8,647  in Commonwealth Bank of on April 10, 2025 and sell it today you would earn a total of  1,151  from holding Commonwealth Bank of or generate 13.31% return on investment over 90 days.

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

Beazer Homes USA  vs.  Commonwealth Bank of

Beazer Homes USA

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Beazer Homes USA are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Beazer Homes reported solid returns over the last few months and may actually be approaching a breakup point.

Commonwealth Bank

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Commonwealth Bank of are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Commonwealth Bank reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Beazer Homes and Commonwealth Bank

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

The idea behind Beazer Homes USA and Commonwealth Bank of 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.