Correlation Between Primary Health and Beazer Homes

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

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

Diversification Opportunities for Primary Health and Beazer Homes

-0.12

Correlation Coefficient

Primary Health  Beazer Homes

Good diversification

The 3 months correlation between Primary and Beazer is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Primary Health Properties and Beazer Homes USA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Beazer Homes USA and Primary Health 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 Primary Health Properties are associated (or correlated) with Beazer Homes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Beazer Homes USA has no effect on the direction of Primary Health i.e., Primary Health and Beazer Homes go up and down completely randomly.

Pair Corralation between Primary Health and Beazer Homes

Assuming the 90 days trading horizon Primary Health Properties is expected to under-perform the Beazer Homes. But the stock apears to be less risky and, when comparing its historical volatility, Primary Health Properties is 3.03 times less risky than Beazer Homes. The stock trades about -0.04 of its potential returns per unit of risk. The Beazer Homes USA is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  1,887  in Beazer Homes USA on April 23, 2025 and sell it today you would earn a total of  455.00  from holding Beazer Homes USA or generate 24.11% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	58.06%
Values	Daily Returns

Primary Health Properties  vs.  Beazer Homes USA

Primary Health Properties

Risk-Adjusted Performance

Very Weak

Over the last 90 days Primary Health Properties has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Primary Health is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Beazer Homes USA

Risk-Adjusted Performance

Good

Over the last 90 days Beazer Homes USA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively uncertain basic indicators, Beazer Homes unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Primary Health and Beazer Homes

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

The idea behind Primary Health Properties and Beazer Homes USA 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.