Correlation Between Escalade Incorporated and Lennar

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

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

Diversification Opportunities for Escalade Incorporated and Lennar

-0.54

Correlation Coefficient

Escalade Incorporated  Lennar

Excellent diversification

The 3 months correlation between Escalade and Lennar is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Escalade Incorporated and Lennar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lennar and Escalade Incorporated 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 Escalade Incorporated are associated (or correlated) with Lennar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lennar has no effect on the direction of Escalade Incorporated i.e., Escalade Incorporated and Lennar go up and down completely randomly.

Pair Corralation between Escalade Incorporated and Lennar

Given the investment horizon of 90 days Escalade Incorporated is expected to generate 2.06 times more return on investment than Lennar. However, Escalade Incorporated is 2.06 times more volatile than Lennar. It trades about 0.02 of its potential returns per unit of risk. Lennar is currently generating about -0.08 per unit of risk. If you would invest  1,327  in Escalade Incorporated on February 7, 2024 and sell it today you would earn a total of  2.00  from holding Escalade Incorporated or generate 0.15% return on investment over 90 days.

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

Escalade Incorporated  vs.  Lennar

Escalade Incorporated

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Escalade Incorporated has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's fundamental indicators remain somewhat strong which may send shares a bit higher in June 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Lennar

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Lennar are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical and fundamental indicators, Lennar is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Escalade Incorporated and Lennar

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

The idea behind Escalade Incorporated and Lennar 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.