Correlation Between LGI Homes and Churchill Downs
Can any of the company-specific risk be diversified away by investing in both LGI Homes and Churchill Downs 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 Churchill Downs into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LGI Homes and Churchill Downs Incorporated, you can compare the effects of market volatilities on LGI Homes and Churchill Downs 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 Churchill Downs. Check out your portfolio center. Please also check ongoing floating volatility patterns of LGI Homes and Churchill Downs.
Diversification Opportunities for LGI Homes and Churchill Downs
-0.15 | Correlation Coefficient |
Good diversification
The 3 months correlation between LGI and Churchill is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding LGI Homes and Churchill Downs Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Churchill Downs 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 Churchill Downs. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Churchill Downs has no effect on the direction of LGI Homes i.e., LGI Homes and Churchill Downs go up and down completely randomly.
Pair Corralation between LGI Homes and Churchill Downs
Assuming the 90 days trading horizon LGI Homes is expected to generate 1.32 times less return on investment than Churchill Downs. In addition to that, LGI Homes is 1.55 times more volatile than Churchill Downs Incorporated. It trades about 0.02 of its total potential returns per unit of risk. Churchill Downs Incorporated is currently generating about 0.04 per unit of volatility. If you would invest 9,536 in Churchill Downs Incorporated on September 12, 2024 and sell it today you would earn a total of 3,564 from holding Churchill Downs Incorporated or generate 37.37% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
LGI Homes vs. Churchill Downs Incorporated
Performance |
| Timeline |
| LGI Homes |
| Churchill Downs |
LGI Homes and Churchill Downs Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LGI Homes and Churchill Downs
The main advantage of trading using opposite LGI Homes and Churchill Downs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LGI Homes position performs unexpectedly, Churchill Downs 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 Churchill Downs will offset losses from the drop in Churchill Downs' long position.The idea behind LGI Homes and Churchill Downs Incorporated 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.| Churchill Downs vs. Scientific Games | Churchill Downs vs. International Game Technology | Churchill Downs vs. Superior Plus Corp | Churchill Downs 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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