Correlation Between CDW Corp and LGI Homes
Can any of the company-specific risk be diversified away by investing in both CDW Corp 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 CDW Corp and LGI Homes into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CDW Corp and LGI Homes, you can compare the effects of market volatilities on CDW Corp 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 CDW Corp with a short position of LGI Homes. Check out your portfolio center. Please also check ongoing floating volatility patterns of CDW Corp and LGI Homes.
Diversification Opportunities for CDW Corp and LGI Homes
Poor diversification
The 3 months correlation between CDW and LGI is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding CDW Corp and LGI Homes in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LGI Homes and CDW Corp 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 CDW Corp 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 CDW Corp i.e., CDW Corp and LGI Homes go up and down completely randomly.
Pair Corralation between CDW Corp and LGI Homes
Considering the 90-day investment horizon CDW Corp is expected to under-perform the LGI Homes. In addition to that, CDW Corp is 1.27 times more volatile than LGI Homes. It trades about -0.26 of its total potential returns per unit of risk. LGI Homes is currently generating about 0.13 per unit of volatility. If you would invest 10,461 in LGI Homes on August 28, 2024 and sell it today you would earn a total of 661.00 from holding LGI Homes or generate 6.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
CDW Corp vs. LGI Homes
Performance |
| Timeline |
| CDW Corp |
| LGI Homes |
CDW Corp and LGI Homes Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CDW Corp and LGI Homes
The main advantage of trading using opposite CDW Corp and LGI Homes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CDW Corp 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.| CDW Corp vs. Plexus Corp | CDW Corp vs. Jabil Circuit | CDW Corp vs. Sanmina | CDW Corp vs. Methode Electronics |
| 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
Other Complementary Tools
| Odds Of Bankruptcy Get analysis of equity chance of financial distress in the next 2 years | |
| Share Portfolio Track or share privately all of your investments from the convenience of any device | |
| Sync Your Broker Sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors. | |
| Correlation Analysis Reduce portfolio risk simply by holding instruments which are not perfectly correlated | |
| Idea Optimizer Use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio |