Correlation Between GOODYEAR T and LGI Homes
Can any of the company-specific risk be diversified away by investing in both GOODYEAR T 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 GOODYEAR T and LGI Homes into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between GOODYEAR T RUBBER and LGI Homes, you can compare the effects of market volatilities on GOODYEAR T 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 GOODYEAR T with a short position of LGI Homes. Check out your portfolio center. Please also check ongoing floating volatility patterns of GOODYEAR T and LGI Homes.
Diversification Opportunities for GOODYEAR T and LGI Homes
0.18 | Correlation Coefficient |
Average diversification
The 3 months correlation between GOODYEAR and LGI is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding GOODYEAR T RUBBER and LGI Homes in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LGI Homes and GOODYEAR T 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 GOODYEAR T RUBBER 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 GOODYEAR T i.e., GOODYEAR T and LGI Homes go up and down completely randomly.
Pair Corralation between GOODYEAR T and LGI Homes
Assuming the 90 days trading horizon GOODYEAR T RUBBER is expected to under-perform the LGI Homes. But the stock apears to be less risky and, when comparing its historical volatility, GOODYEAR T RUBBER is 1.05 times less risky than LGI Homes. The stock trades about -0.02 of its potential returns per unit of risk. The LGI Homes is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest 11,100 in LGI Homes on September 4, 2024 and sell it today you would lose (800.00) from holding LGI Homes or give up 7.21% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 99.6% |
| Values | Daily Returns |
GOODYEAR T RUBBER vs. LGI Homes
Performance |
| Timeline |
| GOODYEAR T RUBBER |
| LGI Homes |
GOODYEAR T and LGI Homes Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GOODYEAR T and LGI Homes
The main advantage of trading using opposite GOODYEAR T and LGI Homes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GOODYEAR T 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.| GOODYEAR T vs. TOTAL GABON | GOODYEAR T vs. Walgreens Boots Alliance | GOODYEAR T vs. Peak Resources Limited |
| LGI Homes vs. Diamyd Medical AB | LGI Homes vs. MARKET VECTR RETAIL | LGI Homes vs. Clearside Biomedical | LGI Homes vs. Auto Trader Group |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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