Correlation Between Evolution Gaming and LGI Homes
Can any of the company-specific risk be diversified away by investing in both Evolution 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 Evolution 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 Evolution Gaming Group and LGI Homes, you can compare the effects of market volatilities on Evolution 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 Evolution Gaming with a short position of LGI Homes. Check out your portfolio center. Please also check ongoing floating volatility patterns of Evolution Gaming and LGI Homes.
Diversification Opportunities for Evolution Gaming and LGI Homes
0.25 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Evolution and LGI is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Evolution Gaming Group and LGI Homes in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LGI Homes and Evolution 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 Evolution Gaming Group 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 Evolution Gaming i.e., Evolution Gaming and LGI Homes go up and down completely randomly.
Pair Corralation between Evolution Gaming and LGI Homes
Assuming the 90 days horizon Evolution Gaming Group is expected to under-perform the LGI Homes. But the pink sheet apears to be less risky and, when comparing its historical volatility, Evolution Gaming Group is 1.94 times less risky than LGI Homes. The pink sheet trades about -0.17 of its potential returns per unit of risk. The LGI Homes is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 10,231 in LGI Homes on August 30, 2024 and sell it today you would earn a total of 799.00 from holding LGI Homes or generate 7.81% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Evolution Gaming Group vs. LGI Homes
Performance |
| Timeline |
| Evolution Gaming |
| LGI Homes |
Evolution Gaming and LGI Homes Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Evolution Gaming and LGI Homes
The main advantage of trading using opposite Evolution Gaming and LGI Homes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Evolution 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.| Evolution Gaming vs. Light Wonder | Evolution Gaming vs. Nasdaq Inc | Evolution Gaming vs. Vertiv Holdings Co | Evolution Gaming vs. IONQ Inc |
| LGI Homes vs. MI Homes | LGI Homes vs. Taylor Morn Home | LGI Homes vs. TRI Pointe Homes | LGI Homes vs. Beazer Homes USA |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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