Correlation Between LGI Homes and PLAY2CHILL
Can any of the company-specific risk be diversified away by investing in both LGI Homes and PLAY2CHILL 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 PLAY2CHILL into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LGI Homes and PLAY2CHILL SA ZY, you can compare the effects of market volatilities on LGI Homes and PLAY2CHILL 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 PLAY2CHILL. Check out your portfolio center. Please also check ongoing floating volatility patterns of LGI Homes and PLAY2CHILL.
Diversification Opportunities for LGI Homes and PLAY2CHILL
0.2 | Correlation Coefficient |
Modest diversification
The 3 months correlation between LGI and PLAY2CHILL is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding LGI Homes and PLAY2CHILL SA ZY in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PLAY2CHILL SA ZY 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 PLAY2CHILL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PLAY2CHILL SA ZY has no effect on the direction of LGI Homes i.e., LGI Homes and PLAY2CHILL go up and down completely randomly.
Pair Corralation between LGI Homes and PLAY2CHILL
Assuming the 90 days trading horizon LGI Homes is expected to generate 5.49 times less return on investment than PLAY2CHILL. In addition to that, LGI Homes is 1.11 times more volatile than PLAY2CHILL SA ZY. It trades about 0.0 of its total potential returns per unit of risk. PLAY2CHILL SA ZY is currently generating about 0.01 per unit of volatility. If you would invest 94.00 in PLAY2CHILL SA ZY on September 2, 2024 and sell it today you would lose (1.00) from holding PLAY2CHILL SA ZY or give up 1.06% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
LGI Homes vs. PLAY2CHILL SA ZY
Performance |
| Timeline |
| LGI Homes |
| PLAY2CHILL SA ZY |
LGI Homes and PLAY2CHILL Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LGI Homes and PLAY2CHILL
The main advantage of trading using opposite LGI Homes and PLAY2CHILL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LGI Homes position performs unexpectedly, PLAY2CHILL 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 PLAY2CHILL will offset losses from the drop in PLAY2CHILL's long position.The idea behind LGI Homes and PLAY2CHILL SA ZY 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.| PLAY2CHILL vs. Nintendo Co | PLAY2CHILL vs. Sea Limited | PLAY2CHILL vs. Superior Plus Corp | PLAY2CHILL vs. NMI Holdings |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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