Correlation Between NVR and Penta Ocean

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

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

Diversification Opportunities for NVR and Penta Ocean

0.38

Correlation Coefficient

NVR  Penta Ocean

Weak diversification

The 3 months correlation between NVR and Penta is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding NVR Inc and Penta Ocean Construction Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Penta Ocean Construc and NVR 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 NVR Inc are associated (or correlated) with Penta Ocean. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Penta Ocean Construc has no effect on the direction of NVR i.e., NVR and Penta Ocean go up and down completely randomly.

Pair Corralation between NVR and Penta Ocean

Assuming the 90 days horizon NVR is expected to generate 4.71 times less return on investment than Penta Ocean. But when comparing it to its historical volatility, NVR Inc is 1.13 times less risky than Penta Ocean. It trades about 0.02 of its potential returns per unit of risk. Penta Ocean Construction Co is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  484.00  in Penta Ocean Construction Co on April 24, 2025 and sell it today you would earn a total of  51.00  from holding Penta Ocean Construction Co or generate 10.54% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

NVR Inc  vs.  Penta Ocean Construction Co

NVR Inc

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in NVR Inc are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, NVR is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Penta Ocean Construc

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Penta Ocean Construction Co are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Penta Ocean may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with NVR and Penta Ocean

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

The idea behind NVR Inc and Penta Ocean Construction Co 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.