Correlation Between LGI Homes and FUTURE GAMING
Can any of the company-specific risk be diversified away by investing in both LGI Homes and FUTURE GAMING 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 FUTURE GAMING into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LGI Homes and FUTURE GAMING GRP, you can compare the effects of market volatilities on LGI Homes and FUTURE GAMING 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 FUTURE GAMING. Check out your portfolio center. Please also check ongoing floating volatility patterns of LGI Homes and FUTURE GAMING.
Diversification Opportunities for LGI Homes and FUTURE GAMING
0.19 | Correlation Coefficient |
Average diversification
The 3 months correlation between LGI and FUTURE is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding LGI Homes and FUTURE GAMING GRP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FUTURE GAMING GRP 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 FUTURE GAMING. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FUTURE GAMING GRP has no effect on the direction of LGI Homes i.e., LGI Homes and FUTURE GAMING go up and down completely randomly.
Pair Corralation between LGI Homes and FUTURE GAMING
Assuming the 90 days trading horizon LGI Homes is expected to generate 0.58 times more return on investment than FUTURE GAMING. However, LGI Homes is 1.71 times less risky than FUTURE GAMING. It trades about 0.22 of its potential returns per unit of risk. FUTURE GAMING GRP is currently generating about -0.1 per unit of risk. If you would invest 9,250 in LGI Homes on September 1, 2024 and sell it today you would earn a total of 1,150 from holding LGI Homes or generate 12.43% 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. FUTURE GAMING GRP
Performance |
| Timeline |
| LGI Homes |
| FUTURE GAMING GRP |
LGI Homes and FUTURE GAMING Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LGI Homes and FUTURE GAMING
The main advantage of trading using opposite LGI Homes and FUTURE GAMING positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LGI Homes position performs unexpectedly, FUTURE GAMING 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 FUTURE GAMING will offset losses from the drop in FUTURE GAMING's long position.The idea behind LGI Homes and FUTURE GAMING GRP 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.| FUTURE GAMING vs. Churchill Downs Incorporated | FUTURE GAMING vs. Scientific Games | FUTURE GAMING vs. International Game Technology | FUTURE GAMING vs. Superior Plus Corp |
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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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