Correlation Between Beazer Homes and COMPUTERSHARE

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

Diversification Opportunities for Beazer Homes and COMPUTERSHARE

0.36

Correlation Coefficient

Beazer Homes  COMPUTERSHARE

Weak diversification

The 3 months correlation between Beazer and COMPUTERSHARE is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Beazer Homes USA and COMPUTERSHARE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on COMPUTERSHARE 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 COMPUTERSHARE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of COMPUTERSHARE has no effect on the direction of Beazer Homes i.e., Beazer Homes and COMPUTERSHARE go up and down completely randomly.

Pair Corralation between Beazer Homes and COMPUTERSHARE

Assuming the 90 days trading horizon Beazer Homes USA is expected to generate 1.7 times more return on investment than COMPUTERSHARE. However, Beazer Homes is 1.7 times more volatile than COMPUTERSHARE. It trades about 0.13 of its potential returns per unit of risk. COMPUTERSHARE is currently generating about 0.05 per unit of risk. If you would invest  1,640  in Beazer Homes USA on April 24, 2025 and sell it today you would earn a total of  340.00  from holding Beazer Homes USA or generate 20.73% return on investment over 90 days.

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

Beazer Homes USA  vs.  COMPUTERSHARE

Beazer Homes USA

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Beazer Homes USA are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Beazer Homes reported solid returns over the last few months and may actually be approaching a breakup point.

COMPUTERSHARE

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in COMPUTERSHARE are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical indicators, COMPUTERSHARE is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Beazer Homes and COMPUTERSHARE

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

The idea behind Beazer Homes USA and COMPUTERSHARE 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.