Correlation Between Fossil and LGI Homes
Can any of the company-specific risk be diversified away by investing in both Fossil 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 Fossil and LGI Homes into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fossil Group and LGI Homes, you can compare the effects of market volatilities on Fossil 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 Fossil with a short position of LGI Homes. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fossil and LGI Homes.
Diversification Opportunities for Fossil and LGI Homes
Very good diversification
The 3 months correlation between Fossil and LGI is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Fossil Group and LGI Homes in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LGI Homes and Fossil 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 Fossil 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 Fossil i.e., Fossil and LGI Homes go up and down completely randomly.
Pair Corralation between Fossil and LGI Homes
Given the investment horizon of 90 days Fossil Group is expected to generate 3.88 times more return on investment than LGI Homes. However, Fossil is 3.88 times more volatile than LGI Homes. It trades about 0.08 of its potential returns per unit of risk. LGI Homes is currently generating about -0.05 per unit of risk. If you would invest 128.00 in Fossil Group on November 1, 2024 and sell it today you would earn a total of 39.00 from holding Fossil Group or generate 30.47% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fossil Group vs. LGI Homes
Performance |
| Timeline |
| Fossil Group |
| LGI Homes |
Fossil and LGI Homes Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fossil and LGI Homes
The main advantage of trading using opposite Fossil and LGI Homes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fossil 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.| Fossil vs. Lanvin Group Holdings | Fossil vs. Signet Jewelers | Fossil vs. Tapestry | Fossil vs. Capri Holdings |
| 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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