Correlation Between TSOGO SUN and LGI Homes
Can any of the company-specific risk be diversified away by investing in both TSOGO SUN 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 TSOGO SUN and LGI Homes into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between TSOGO SUN GAMING and LGI Homes, you can compare the effects of market volatilities on TSOGO SUN 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 TSOGO SUN with a short position of LGI Homes. Check out your portfolio center. Please also check ongoing floating volatility patterns of TSOGO SUN and LGI Homes.
Diversification Opportunities for TSOGO SUN and LGI Homes
Weak diversification
The 3 months correlation between TSOGO and LGI is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding TSOGO SUN GAMING and LGI Homes in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LGI Homes and TSOGO SUN 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 TSOGO SUN GAMING 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 TSOGO SUN i.e., TSOGO SUN and LGI Homes go up and down completely randomly.
Pair Corralation between TSOGO SUN and LGI Homes
Assuming the 90 days horizon TSOGO SUN GAMING is expected to under-perform the LGI Homes. But the stock apears to be less risky and, when comparing its historical volatility, TSOGO SUN GAMING is 2.62 times less risky than LGI Homes. The stock trades about -0.37 of its potential returns per unit of risk. The LGI Homes is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest 9,250 in LGI Homes on September 1, 2024 and sell it today you would earn a total of 1,150 from holding LGI Homes or generate 12.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
TSOGO SUN GAMING vs. LGI Homes
Performance |
| Timeline |
| TSOGO SUN GAMING |
| LGI Homes |
TSOGO SUN and LGI Homes Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with TSOGO SUN and LGI Homes
The main advantage of trading using opposite TSOGO SUN and LGI Homes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TSOGO SUN 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.| TSOGO SUN vs. Superior Plus Corp | TSOGO SUN vs. NMI Holdings | TSOGO SUN vs. Origin Agritech | TSOGO SUN vs. SIVERS SEMICONDUCTORS AB |
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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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