Correlation Between FormFactor and LGI Homes
Can any of the company-specific risk be diversified away by investing in both FormFactor 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 FormFactor and LGI Homes into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between FormFactor and LGI Homes, you can compare the effects of market volatilities on FormFactor 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 FormFactor with a short position of LGI Homes. Check out your portfolio center. Please also check ongoing floating volatility patterns of FormFactor and LGI Homes.
Diversification Opportunities for FormFactor and LGI Homes
0.4 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between FormFactor and LGI is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding FormFactor and LGI Homes in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LGI Homes and FormFactor 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 FormFactor 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 FormFactor i.e., FormFactor and LGI Homes go up and down completely randomly.
Pair Corralation between FormFactor and LGI Homes
Given the investment horizon of 90 days FormFactor is expected to generate 1.13 times more return on investment than LGI Homes. However, FormFactor is 1.13 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 0.01 per unit of risk. If you would invest 3,490 in FormFactor on August 29, 2024 and sell it today you would earn a total of 441.00 from holding FormFactor or generate 12.64% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
FormFactor vs. LGI Homes
Performance |
| Timeline |
| FormFactor |
| LGI Homes |
FormFactor and LGI Homes Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with FormFactor and LGI Homes
The main advantage of trading using opposite FormFactor and LGI Homes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FormFactor 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.| FormFactor vs. Silicon Laboratories | FormFactor vs. Diodes Incorporated | FormFactor vs. MACOM Technology Solutions | FormFactor vs. Amkor Technology |
| 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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