Correlation Between Lennar and AeroVironment

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

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

Diversification Opportunities for Lennar and AeroVironment

0.56

Correlation Coefficient

Lennar  AeroVironment

Very weak diversification

The 3 months correlation between Lennar and AeroVironment is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Lennar and AeroVironment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AeroVironment and Lennar 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 Lennar are associated (or correlated) with AeroVironment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AeroVironment has no effect on the direction of Lennar i.e., Lennar and AeroVironment go up and down completely randomly.

Pair Corralation between Lennar and AeroVironment

Assuming the 90 days horizon Lennar is expected to generate 4.84 times less return on investment than AeroVironment. But when comparing it to its historical volatility, Lennar is 1.75 times less risky than AeroVironment. It trades about 0.08 of its potential returns per unit of risk. AeroVironment is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  16,001  in AeroVironment on May 7, 2025 and sell it today you would earn a total of  10,794  from holding AeroVironment or generate 67.46% return on investment over 90 days.

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

Lennar  vs.  AeroVironment

Lennar

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Lennar are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Lennar may actually be approaching a critical reversion point that can send shares even higher in September 2025.

AeroVironment

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in AeroVironment are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, AeroVironment showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lennar and AeroVironment

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

The idea behind Lennar and AeroVironment 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.