Correlation Between Chongqing Machinery and LGI Homes
Can any of the company-specific risk be diversified away by investing in both Chongqing Machinery 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 Chongqing Machinery and LGI Homes into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Chongqing Machinery Electric and LGI Homes, you can compare the effects of market volatilities on Chongqing Machinery 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 Chongqing Machinery with a short position of LGI Homes. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chongqing Machinery and LGI Homes.
Diversification Opportunities for Chongqing Machinery and LGI Homes
0.06 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Chongqing and LGI is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Chongqing Machinery Electric and LGI Homes in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LGI Homes and Chongqing Machinery 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 Chongqing Machinery Electric 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 Chongqing Machinery i.e., Chongqing Machinery and LGI Homes go up and down completely randomly.
Pair Corralation between Chongqing Machinery and LGI Homes
Assuming the 90 days horizon Chongqing Machinery Electric is expected to generate 1.47 times more return on investment than LGI Homes. However, Chongqing Machinery is 1.47 times more volatile than LGI Homes. It trades about 0.03 of its potential returns per unit of risk. LGI Homes is currently generating about 0.0 per unit of risk. If you would invest 6.28 in Chongqing Machinery Electric on September 3, 2024 and sell it today you would earn a total of 1.07 from holding Chongqing Machinery Electric or generate 17.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Chongqing Machinery Electric vs. LGI Homes
Performance |
| Timeline |
| Chongqing Machinery |
| LGI Homes |
Chongqing Machinery and LGI Homes Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Chongqing Machinery and LGI Homes
The main advantage of trading using opposite Chongqing Machinery and LGI Homes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chongqing Machinery 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.| Chongqing Machinery vs. Geely Automobile Holdings | Chongqing Machinery vs. TOWNSQUARE MEDIA INC | Chongqing Machinery vs. JD SPORTS FASH | Chongqing Machinery vs. XLMedia PLC |
| LGI Homes vs. X FAB Silicon Foundries | LGI Homes vs. Eastman Chemical | LGI Homes vs. WESTLAKE CHEMICAL | LGI Homes vs. GOODYEAR T RUBBER |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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