Correlation Between TT Electronics and LGI Homes
Can any of the company-specific risk be diversified away by investing in both TT Electronics 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 TT Electronics and LGI Homes into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between TT Electronics PLC and LGI Homes, you can compare the effects of market volatilities on TT Electronics 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 TT Electronics with a short position of LGI Homes. Check out your portfolio center. Please also check ongoing floating volatility patterns of TT Electronics and LGI Homes.
Diversification Opportunities for TT Electronics and LGI Homes
0.13 | Correlation Coefficient |
Average diversification
The 3 months correlation between 7TT and LGI is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding TT Electronics PLC and LGI Homes in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LGI Homes and TT Electronics 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 TT Electronics PLC 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 TT Electronics i.e., TT Electronics and LGI Homes go up and down completely randomly.
Pair Corralation between TT Electronics and LGI Homes
Assuming the 90 days trading horizon TT Electronics PLC is expected to under-perform the LGI Homes. In addition to that, TT Electronics is 1.03 times more volatile than LGI Homes. It trades about -0.01 of its total potential returns per unit of risk. LGI Homes is currently generating about 0.02 per unit of volatility. If you would invest 8,632 in LGI Homes on September 18, 2024 and sell it today you would earn a total of 918.00 from holding LGI Homes or generate 10.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
TT Electronics PLC vs. LGI Homes
Performance |
| Timeline |
| TT Electronics PLC |
| LGI Homes |
TT Electronics and LGI Homes Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with TT Electronics and LGI Homes
The main advantage of trading using opposite TT Electronics and LGI Homes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TT Electronics 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.| TT Electronics vs. Apple Inc | TT Electronics vs. Apple Inc | TT Electronics vs. Apple Inc | TT Electronics vs. Apple Inc |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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