Correlation Between Cass Information and LGI Homes
Can any of the company-specific risk be diversified away by investing in both Cass Information 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 Cass Information and LGI Homes into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cass Information Systems and LGI Homes, you can compare the effects of market volatilities on Cass Information 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 Cass Information with a short position of LGI Homes. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cass Information and LGI Homes.
Diversification Opportunities for Cass Information and LGI Homes
-0.14 | Correlation Coefficient |
Good diversification
The 3 months correlation between Cass and LGI is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Cass Information Systems and LGI Homes in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LGI Homes and Cass Information 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 Cass Information 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 Cass Information i.e., Cass Information and LGI Homes go up and down completely randomly.
Pair Corralation between Cass Information and LGI Homes
Assuming the 90 days horizon Cass Information Systems is expected to generate 0.85 times more return on investment than LGI Homes. However, Cass Information Systems is 1.17 times less risky than LGI Homes. It trades about 0.2 of its potential returns per unit of risk. LGI Homes is currently generating about 0.1 per unit of risk. If you would invest 3,860 in Cass Information Systems on August 26, 2024 and sell it today you would earn a total of 360.00 from holding Cass Information Systems or generate 9.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cass Information Systems vs. LGI Homes
Performance |
| Timeline |
| Cass Information Systems |
| LGI Homes |
Cass Information and LGI Homes Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cass Information and LGI Homes
The main advantage of trading using opposite Cass Information and LGI Homes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cass Information 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.| Cass Information vs. Regions Financial | Cass Information vs. The Hanover Insurance | Cass Information vs. CHIBA BANK | Cass Information vs. TFS FINANCIAL |
| LGI Homes vs. Norwegian Air Shuttle | LGI Homes vs. Cass Information Systems | LGI Homes vs. DATAGROUP SE | LGI Homes vs. ALTAIR RES 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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