Correlation Between LGI Homes and Neinor Homes
Can any of the company-specific risk be diversified away by investing in both LGI Homes and Neinor 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 LGI Homes and Neinor Homes into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LGI Homes and Neinor Homes SA, you can compare the effects of market volatilities on LGI Homes and Neinor 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 LGI Homes with a short position of Neinor Homes. Check out your portfolio center. Please also check ongoing floating volatility patterns of LGI Homes and Neinor Homes.
Diversification Opportunities for LGI Homes and Neinor Homes
0.1 | Correlation Coefficient |
Average diversification
The 3 months correlation between LGI and Neinor is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding LGI Homes and Neinor Homes SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Neinor Homes SA and LGI Homes 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 LGI Homes are associated (or correlated) with Neinor Homes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Neinor Homes SA has no effect on the direction of LGI Homes i.e., LGI Homes and Neinor Homes go up and down completely randomly.
Pair Corralation between LGI Homes and Neinor Homes
Assuming the 90 days trading horizon LGI Homes is expected to generate 2.01 times more return on investment than Neinor Homes. However, LGI Homes is 2.01 times more volatile than Neinor Homes SA. It trades about 0.1 of its potential returns per unit of risk. Neinor Homes SA is currently generating about 0.03 per unit of risk. If you would invest 9,650 in LGI Homes on August 27, 2024 and sell it today you would earn a total of 450.00 from holding LGI Homes or generate 4.66% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
LGI Homes vs. Neinor Homes SA
Performance |
| Timeline |
| LGI Homes |
| Neinor Homes SA |
LGI Homes and Neinor Homes Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LGI Homes and Neinor Homes
The main advantage of trading using opposite LGI Homes and Neinor Homes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LGI Homes position performs unexpectedly, Neinor 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 Neinor Homes will offset losses from the drop in Neinor Homes' long position.The idea behind LGI Homes and Neinor Homes SA pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Neinor Homes vs. Apple Inc | Neinor Homes vs. Apple Inc | Neinor Homes vs. Apple Inc | Neinor Homes vs. Apple Inc |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
Other Complementary Tools
| Transaction History View history of all your transactions and understand their impact on performance | |
| Portfolio Diagnostics Use generated alerts and portfolio events aggregator to diagnose current holdings | |
| Portfolio Manager State of the art Portfolio Manager to monitor and improve performance of your invested capital | |
| Price Ceiling Movement Calculate and plot Price Ceiling Movement for different equity instruments | |
| Bonds Directory Find actively traded corporate debentures issued by US companies |