Correlation Between LGI Homes and MI Homes
Can any of the company-specific risk be diversified away by investing in both LGI Homes and MI 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 MI 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 MI Homes, you can compare the effects of market volatilities on LGI Homes and MI 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 MI Homes. Check out your portfolio center. Please also check ongoing floating volatility patterns of LGI Homes and MI Homes.
Diversification Opportunities for LGI Homes and MI Homes
Almost no diversification
The 3 months correlation between LGI and 4MI is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding LGI Homes and MI Homes in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MI Homes 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 MI Homes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MI Homes has no effect on the direction of LGI Homes i.e., LGI Homes and MI Homes go up and down completely randomly.
Pair Corralation between LGI Homes and MI Homes
Assuming the 90 days trading horizon LGI Homes is expected to generate 221.0 times less return on investment than MI Homes. In addition to that, LGI Homes is 1.21 times more volatile than MI Homes. It trades about 0.0 of its total potential returns per unit of risk. MI Homes is currently generating about 0.08 per unit of volatility. If you would invest 5,400 in MI Homes on November 19, 2024 and sell it today you would earn a total of 6,055 from holding MI Homes or generate 112.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
LGI Homes vs. MI Homes
Performance |
| Timeline |
| LGI Homes |
| MI Homes |
LGI Homes and MI Homes Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LGI Homes and MI Homes
The main advantage of trading using opposite LGI Homes and MI Homes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LGI Homes position performs unexpectedly, MI 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 MI Homes will offset losses from the drop in MI Homes' long position.| LGI Homes vs. alstria office REIT AG | LGI Homes vs. Infrastrutture Wireless Italiane | LGI Homes vs. Vienna Insurance Group | LGI Homes vs. Insurance Australia Group |
| MI Homes vs. Datadog | MI Homes vs. Linedata Services SA | MI Homes vs. Global Ship Lease | MI Homes vs. AEGEAN AIRLINES |
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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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