Correlation Between Boyd Gaming and LGI Homes
Can any of the company-specific risk be diversified away by investing in both Boyd Gaming 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 Boyd Gaming and LGI Homes into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Boyd Gaming and LGI Homes, you can compare the effects of market volatilities on Boyd Gaming 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 Boyd Gaming with a short position of LGI Homes. Check out your portfolio center. Please also check ongoing floating volatility patterns of Boyd Gaming and LGI Homes.
Diversification Opportunities for Boyd Gaming and LGI Homes
0.0 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Boyd and LGI is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Boyd Gaming and LGI Homes in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LGI Homes and Boyd Gaming 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 Boyd Gaming 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 Boyd Gaming i.e., Boyd Gaming and LGI Homes go up and down completely randomly.
Pair Corralation between Boyd Gaming and LGI Homes
Assuming the 90 days trading horizon Boyd Gaming is expected to generate 1.44 times less return on investment than LGI Homes. But when comparing it to its historical volatility, Boyd Gaming is 1.52 times less risky than LGI Homes. It trades about 0.23 of its potential returns per unit of risk. LGI Homes is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest 9,250 in LGI Homes on September 1, 2024 and sell it today you would earn a total of 1,150 from holding LGI Homes or generate 12.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Boyd Gaming vs. LGI Homes
Performance |
| Timeline |
| Boyd Gaming |
| LGI Homes |
Boyd Gaming and LGI Homes Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Boyd Gaming and LGI Homes
The main advantage of trading using opposite Boyd Gaming and LGI Homes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Boyd Gaming 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.| Boyd Gaming vs. Apple Inc | Boyd Gaming vs. Apple Inc | Boyd Gaming vs. Apple Inc | Boyd Gaming 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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