Correlation Between Reynolds Consumer and Lennar

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

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

Diversification Opportunities for Reynolds Consumer and Lennar

0.13

Correlation Coefficient

Reynolds Consumer  Lennar

Average diversification

The 3 months correlation between Reynolds and Lennar is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Reynolds Consumer Products and Lennar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lennar and Reynolds Consumer 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 Reynolds Consumer Products are associated (or correlated) with Lennar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lennar has no effect on the direction of Reynolds Consumer i.e., Reynolds Consumer and Lennar go up and down completely randomly.

Pair Corralation between Reynolds Consumer and Lennar

Given the investment horizon of 90 days Reynolds Consumer Products is expected to under-perform the Lennar. But the stock apears to be less risky and, when comparing its historical volatility, Reynolds Consumer Products is 1.85 times less risky than Lennar. The stock trades about -0.03 of its potential returns per unit of risk. The Lennar is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  10,261  in Lennar on May 7, 2025 and sell it today you would earn a total of  1,071  from holding Lennar or generate 10.44% return on investment over 90 days.

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

Reynolds Consumer Products  vs.  Lennar

Reynolds Consumer

Risk-Adjusted Performance

Weakest

Over the last 90 days Reynolds Consumer Products has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Reynolds Consumer is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Lennar

Risk-Adjusted Performance

Mild

Compared to the overall equity markets, risk-adjusted returns on investments in Lennar are ranked lower than 5 (%) 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.

Pair Trading with Reynolds Consumer and Lennar

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

The idea behind Reynolds Consumer Products and Lennar 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.