Correlation Between LGI Homes and Brinker International
Can any of the company-specific risk be diversified away by investing in both LGI Homes and Brinker International 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 Brinker International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LGI Homes and Brinker International, you can compare the effects of market volatilities on LGI Homes and Brinker International 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 Brinker International. Check out your portfolio center. Please also check ongoing floating volatility patterns of LGI Homes and Brinker International.
Diversification Opportunities for LGI Homes and Brinker International
0.01 | Correlation Coefficient |
Significant diversification
The 3 months correlation between LGI and Brinker is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding LGI Homes and Brinker International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brinker International 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 Brinker International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brinker International has no effect on the direction of LGI Homes i.e., LGI Homes and Brinker International go up and down completely randomly.
Pair Corralation between LGI Homes and Brinker International
Assuming the 90 days trading horizon LGI Homes is expected to generate 52.15 times less return on investment than Brinker International. In addition to that, LGI Homes is 1.05 times more volatile than Brinker International. It trades about 0.0 of its total potential returns per unit of risk. Brinker International is currently generating about 0.12 per unit of volatility. If you would invest 3,460 in Brinker International on October 12, 2024 and sell it today you would earn a total of 10,040 from holding Brinker International or generate 290.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 99.8% |
| Values | Daily Returns |
LGI Homes vs. Brinker International
Performance |
| Timeline |
| LGI Homes |
| Brinker International |
LGI Homes and Brinker International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LGI Homes and Brinker International
The main advantage of trading using opposite LGI Homes and Brinker International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LGI Homes position performs unexpectedly, Brinker International 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 Brinker International will offset losses from the drop in Brinker International's long position.| LGI Homes vs. BJs Restaurants | LGI Homes vs. DENTSPLY SIRONA | LGI Homes vs. Liberty Broadband | LGI Homes vs. Yuexiu Transport Infrastructure |
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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 Global Correlations module to find global opportunities by holding instruments from different markets.
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