Correlation Between Axalta Coating and LGI Homes
Can any of the company-specific risk be diversified away by investing in both Axalta Coating 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 Axalta Coating and LGI Homes into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Axalta Coating Systems and LGI Homes, you can compare the effects of market volatilities on Axalta Coating 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 Axalta Coating with a short position of LGI Homes. Check out your portfolio center. Please also check ongoing floating volatility patterns of Axalta Coating and LGI Homes.
Diversification Opportunities for Axalta Coating and LGI Homes
-0.24 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Axalta and LGI is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Axalta Coating Systems and LGI Homes in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LGI Homes and Axalta Coating 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 Axalta Coating Systems 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 Axalta Coating i.e., Axalta Coating and LGI Homes go up and down completely randomly.
Pair Corralation between Axalta Coating and LGI Homes
Given the investment horizon of 90 days Axalta Coating Systems is expected to generate 0.99 times more return on investment than LGI Homes. However, Axalta Coating Systems is 1.01 times less risky than LGI Homes. It trades about 0.29 of its potential returns per unit of risk. LGI Homes is currently generating about 0.04 per unit of risk. If you would invest 3,559 in Axalta Coating Systems on August 27, 2024 and sell it today you would earn a total of 493.00 from holding Axalta Coating Systems or generate 13.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Axalta Coating Systems vs. LGI Homes
Performance |
| Timeline |
| Axalta Coating Systems |
| LGI Homes |
Axalta Coating and LGI Homes Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Axalta Coating and LGI Homes
The main advantage of trading using opposite Axalta Coating and LGI Homes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Axalta Coating 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.| Axalta Coating vs. Avient Corp | Axalta Coating vs. H B Fuller | Axalta Coating vs. Quaker Chemical | Axalta Coating vs. Cabot |
| LGI Homes vs. Arhaus Inc | LGI Homes vs. Floor Decor Holdings | LGI Homes vs. Kingfisher plc | LGI Homes vs. Haverty Furniture Companies |
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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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