Correlation Between Power Metal and Beazer Homes

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Can any of the company-specific risk be diversified away by investing in both Power Metal 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 Power Metal and Beazer Homes into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Power Metal Resources and Beazer Homes USA, you can compare the effects of market volatilities on Power Metal 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 Power Metal with a short position of Beazer Homes. Check out your portfolio center. Please also check ongoing floating volatility patterns of Power Metal and Beazer Homes.

Diversification Opportunities for Power Metal and Beazer Homes

0.36
  Correlation Coefficient

Weak diversification

The 3 months correlation between Power and Beazer is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Power Metal Resources 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 Power Metal 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 Power Metal Resources 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 Power Metal i.e., Power Metal and Beazer Homes go up and down completely randomly.

Pair Corralation between Power Metal and Beazer Homes

Assuming the 90 days trading horizon Power Metal is expected to generate 2.82 times less return on investment than Beazer Homes. But when comparing it to its historical volatility, Power Metal Resources is 1.05 times less risky than Beazer Homes. It trades about 0.07 of its potential returns per unit of risk. 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 Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy58.06%
ValuesDaily Returns

Power Metal Resources  vs.  Beazer Homes USA

 Performance 
       Timeline  
Power Metal Resources 

Risk-Adjusted Performance

Modest

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Power Metal Resources are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Power Metal exhibited solid returns over the last few months and may actually be approaching a breakup point.
Beazer Homes USA 

Risk-Adjusted Performance

Good

 
Weak
 
Strong
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.

Power Metal and Beazer Homes Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Power Metal and Beazer Homes

The main advantage of trading using opposite Power Metal and Beazer Homes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Power Metal 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 Power Metal Resources 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 Stocks Directory module to find actively traded stocks across global markets.

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