Correlation Between Benchmark Electronics and LGI Homes
Can any of the company-specific risk be diversified away by investing in both Benchmark 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 Benchmark 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 Benchmark Electronics and LGI Homes, you can compare the effects of market volatilities on Benchmark 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 Benchmark Electronics with a short position of LGI Homes. Check out your portfolio center. Please also check ongoing floating volatility patterns of Benchmark Electronics and LGI Homes.
Diversification Opportunities for Benchmark Electronics and LGI Homes
-0.28 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Benchmark and LGI is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Benchmark Electronics and LGI Homes in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LGI Homes and Benchmark 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 Benchmark Electronics 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 Benchmark Electronics i.e., Benchmark Electronics and LGI Homes go up and down completely randomly.
Pair Corralation between Benchmark Electronics and LGI Homes
Assuming the 90 days horizon Benchmark Electronics is expected to generate 0.84 times more return on investment than LGI Homes. However, Benchmark Electronics is 1.2 times less risky than LGI Homes. It trades about 0.07 of its potential returns per unit of risk. LGI Homes is currently generating about 0.02 per unit of risk. If you would invest 2,396 in Benchmark Electronics on September 18, 2024 and sell it today you would earn a total of 2,224 from holding Benchmark Electronics or generate 92.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Benchmark Electronics vs. LGI Homes
Performance |
| Timeline |
| Benchmark Electronics |
| LGI Homes |
Benchmark Electronics and LGI Homes Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Benchmark Electronics and LGI Homes
The main advantage of trading using opposite Benchmark Electronics and LGI Homes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Benchmark 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.| Benchmark Electronics vs. Superior Plus Corp | Benchmark Electronics vs. SIVERS SEMICONDUCTORS AB | Benchmark Electronics vs. Norsk Hydro ASA | Benchmark Electronics vs. Reliance Steel Aluminum |
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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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