Correlation Between Legacy Housing and Green Brick
Can any of the company-specific risk be diversified away by investing in both Legacy Housing and Green Brick 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 Legacy Housing and Green Brick into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Legacy Housing Corp and Green Brick Partners, you can compare the effects of market volatilities on Legacy Housing and Green Brick 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 Legacy Housing with a short position of Green Brick. Check out your portfolio center. Please also check ongoing floating volatility patterns of Legacy Housing and Green Brick.
Diversification Opportunities for Legacy Housing and Green Brick
0.02 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Legacy and Green is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Legacy Housing Corp and Green Brick Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Green Brick Partners and Legacy Housing 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 Legacy Housing Corp are associated (or correlated) with Green Brick. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Green Brick Partners has no effect on the direction of Legacy Housing i.e., Legacy Housing and Green Brick go up and down completely randomly.
Pair Corralation between Legacy Housing and Green Brick
Given the investment horizon of 90 days Legacy Housing Corp is expected to under-perform the Green Brick. In addition to that, Legacy Housing is 1.98 times more volatile than Green Brick Partners. It trades about -0.06 of its total potential returns per unit of risk. Green Brick Partners is currently generating about -0.06 per unit of volatility. If you would invest 2,435 in Green Brick Partners on August 28, 2024 and sell it today you would lose (63.00) from holding Green Brick Partners or give up 2.59% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Legacy Housing Corp vs. Green Brick Partners
Performance |
| Timeline |
| Legacy Housing Corp |
| Green Brick Partners |
Legacy Housing and Green Brick Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Legacy Housing and Green Brick
The main advantage of trading using opposite Legacy Housing and Green Brick positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Legacy Housing position performs unexpectedly, Green Brick 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 Green Brick will offset losses from the drop in Green Brick's long position.| Legacy Housing vs. MI Homes | Legacy Housing vs. Taylor Morn Home | Legacy Housing vs. TRI Pointe Homes | Legacy Housing vs. Beazer Homes USA |
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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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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