Correlation Between DR Horton and Superior Uniform

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

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

Diversification Opportunities for DR Horton and Superior Uniform

-0.6

Correlation Coefficient

DR Horton  Superior Uniform

Excellent diversification

The 3 months correlation between DHI and Superior is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding DR Horton and Superior Uniform Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Superior Uniform and DR Horton 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 DR Horton are associated (or correlated) with Superior Uniform. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Superior Uniform has no effect on the direction of DR Horton i.e., DR Horton and Superior Uniform go up and down completely randomly.

Pair Corralation between DR Horton and Superior Uniform

Considering the 90-day investment horizon DR Horton is expected to under-perform the Superior Uniform. But the stock apears to be less risky and, when comparing its historical volatility, DR Horton is 1.34 times less risky than Superior Uniform. The stock trades about -0.56 of its potential returns per unit of risk. The Superior Uniform Group is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  1,679  in Superior Uniform Group on September 27, 2024 and sell it today you would lose (43.00) from holding Superior Uniform Group or give up 2.56% of portfolio value over 90 days.

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

DR Horton  vs.  Superior Uniform Group

DR Horton

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DR Horton has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's technical indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Superior Uniform

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Superior Uniform Group are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Superior Uniform is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with DR Horton and Superior Uniform

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

The idea behind DR Horton and Superior Uniform Group 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.