Correlation Between LGI Homes and COMMONWBK AUSTRSPADRS
Can any of the company-specific risk be diversified away by investing in both LGI Homes and COMMONWBK AUSTRSPADRS 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 COMMONWBK AUSTRSPADRS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LGI Homes and COMMONWBK AUSTRSPADRS, you can compare the effects of market volatilities on LGI Homes and COMMONWBK AUSTRSPADRS 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 COMMONWBK AUSTRSPADRS. Check out your portfolio center. Please also check ongoing floating volatility patterns of LGI Homes and COMMONWBK AUSTRSPADRS.
Diversification Opportunities for LGI Homes and COMMONWBK AUSTRSPADRS
-0.09 | Correlation Coefficient |
Good diversification
The 3 months correlation between LGI and COMMONWBK is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding LGI Homes and COMMONWBK AUSTRSPADRS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on COMMONWBK AUSTRSPADRS 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 COMMONWBK AUSTRSPADRS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of COMMONWBK AUSTRSPADRS has no effect on the direction of LGI Homes i.e., LGI Homes and COMMONWBK AUSTRSPADRS go up and down completely randomly.
Pair Corralation between LGI Homes and COMMONWBK AUSTRSPADRS
Assuming the 90 days trading horizon LGI Homes is expected to under-perform the COMMONWBK AUSTRSPADRS. In addition to that, LGI Homes is 1.68 times more volatile than COMMONWBK AUSTRSPADRS. It trades about -0.03 of its total potential returns per unit of risk. COMMONWBK AUSTRSPADRS is currently generating about 0.15 per unit of volatility. If you would invest 9,100 in COMMONWBK AUSTRSPADRS on September 14, 2024 and sell it today you would earn a total of 350.00 from holding COMMONWBK AUSTRSPADRS or generate 3.85% 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. COMMONWBK AUSTRSPADRS
Performance |
| Timeline |
| LGI Homes |
| COMMONWBK AUSTRSPADRS |
LGI Homes and COMMONWBK AUSTRSPADRS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LGI Homes and COMMONWBK AUSTRSPADRS
The main advantage of trading using opposite LGI Homes and COMMONWBK AUSTRSPADRS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LGI Homes position performs unexpectedly, COMMONWBK AUSTRSPADRS 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 COMMONWBK AUSTRSPADRS will offset losses from the drop in COMMONWBK AUSTRSPADRS's long position.The idea behind LGI Homes and COMMONWBK AUSTRSPADRS 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.| COMMONWBK AUSTRSPADRS vs. DFS Furniture PLC | COMMONWBK AUSTRSPADRS vs. INVITATION HOMES DL | COMMONWBK AUSTRSPADRS vs. LGI Homes | COMMONWBK AUSTRSPADRS vs. CENTURIA OFFICE REIT |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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