Correlation Between SWISS WATER and LGI Homes
Can any of the company-specific risk be diversified away by investing in both SWISS WATER and LGI 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 SWISS WATER and LGI Homes into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SWISS WATER DECAFFCOFFEE and LGI Homes, you can compare the effects of market volatilities on SWISS WATER and LGI 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 SWISS WATER with a short position of LGI Homes. Check out your portfolio center. Please also check ongoing floating volatility patterns of SWISS WATER and LGI Homes.
Diversification Opportunities for SWISS WATER and LGI Homes
-0.24 | Correlation Coefficient |
Very good diversification
The 3 months correlation between SWISS and LGI is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding SWISS WATER DECAFFCOFFEE and LGI Homes in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LGI Homes and SWISS WATER 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 SWISS WATER DECAFFCOFFEE are associated (or correlated) with LGI Homes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LGI Homes has no effect on the direction of SWISS WATER i.e., SWISS WATER and LGI Homes go up and down completely randomly.
Pair Corralation between SWISS WATER and LGI Homes
Assuming the 90 days horizon SWISS WATER DECAFFCOFFEE is expected to under-perform the LGI Homes. In addition to that, SWISS WATER is 1.16 times more volatile than LGI Homes. It trades about -0.09 of its total potential returns per unit of risk. LGI Homes is currently generating about 0.03 per unit of volatility. If you would invest 9,850 in LGI Homes on September 13, 2024 and sell it today you would earn a total of 100.00 from holding LGI Homes or generate 1.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
SWISS WATER DECAFFCOFFEE vs. LGI Homes
Performance |
| Timeline |
| SWISS WATER DECAFFCOFFEE |
| LGI Homes |
SWISS WATER and LGI Homes Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SWISS WATER and LGI Homes
The main advantage of trading using opposite SWISS WATER and LGI Homes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SWISS WATER position performs unexpectedly, LGI 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 LGI Homes will offset losses from the drop in LGI Homes' long position.| SWISS WATER vs. Japan Post Insurance | SWISS WATER vs. CAL MAINE FOODS | SWISS WATER vs. REVO INSURANCE SPA | SWISS WATER vs. JJ SNACK FOODS |
| LGI Homes vs. NURAN WIRELESS INC | LGI Homes vs. Infrastrutture Wireless Italiane | LGI Homes vs. TITAN MACHINERY | LGI Homes vs. Corporate Office Properties |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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