Correlation Between LGI Homes and UET United
Can any of the company-specific risk be diversified away by investing in both LGI Homes and UET United 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 UET United into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LGI Homes and UET United Electronic, you can compare the effects of market volatilities on LGI Homes and UET United 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 UET United. Check out your portfolio center. Please also check ongoing floating volatility patterns of LGI Homes and UET United.
Diversification Opportunities for LGI Homes and UET United
0.38 | Correlation Coefficient |
Weak diversification
The 3 months correlation between LGI and UET is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding LGI Homes and UET United Electronic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UET United Electronic 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 UET United. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UET United Electronic has no effect on the direction of LGI Homes i.e., LGI Homes and UET United go up and down completely randomly.
Pair Corralation between LGI Homes and UET United
Assuming the 90 days trading horizon LGI Homes is expected to generate 2.03 times less return on investment than UET United. But when comparing it to its historical volatility, LGI Homes is 1.59 times less risky than UET United. It trades about 0.02 of its potential returns per unit of risk. UET United Electronic is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 81.00 in UET United Electronic on September 18, 2024 and sell it today you would earn a total of 12.00 from holding UET United Electronic or generate 14.81% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
LGI Homes vs. UET United Electronic
Performance |
| Timeline |
| LGI Homes |
| UET United Electronic |
LGI Homes and UET United Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LGI Homes and UET United
The main advantage of trading using opposite LGI Homes and UET United positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LGI Homes position performs unexpectedly, UET United 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 UET United will offset losses from the drop in UET United's long position.The idea behind LGI Homes and UET United Electronic 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.| UET United vs. Cisco Systems | UET United vs. Nokia | UET United vs. Superior Plus Corp | UET United vs. SIVERS SEMICONDUCTORS AB |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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