Correlation Between LGI Homes and EIDESVIK OFFSHORE
Can any of the company-specific risk be diversified away by investing in both LGI Homes and EIDESVIK OFFSHORE 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 EIDESVIK OFFSHORE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LGI Homes and EIDESVIK OFFSHORE NK, you can compare the effects of market volatilities on LGI Homes and EIDESVIK OFFSHORE 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 EIDESVIK OFFSHORE. Check out your portfolio center. Please also check ongoing floating volatility patterns of LGI Homes and EIDESVIK OFFSHORE.
Diversification Opportunities for LGI Homes and EIDESVIK OFFSHORE
0.1 | Correlation Coefficient |
Average diversification
The 3 months correlation between LGI and EIDESVIK is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding LGI Homes and EIDESVIK OFFSHORE NK in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EIDESVIK OFFSHORE 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 EIDESVIK OFFSHORE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EIDESVIK OFFSHORE has no effect on the direction of LGI Homes i.e., LGI Homes and EIDESVIK OFFSHORE go up and down completely randomly.
Pair Corralation between LGI Homes and EIDESVIK OFFSHORE
Assuming the 90 days trading horizon LGI Homes is expected to generate 2.09 times more return on investment than EIDESVIK OFFSHORE. However, LGI Homes is 2.09 times more volatile than EIDESVIK OFFSHORE NK. It trades about 0.17 of its potential returns per unit of risk. EIDESVIK OFFSHORE NK is currently generating about 0.04 per unit of risk. If you would invest 9,550 in LGI Homes on September 3, 2024 and sell it today you would earn a total of 850.00 from holding LGI Homes or generate 8.9% 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. EIDESVIK OFFSHORE NK
Performance |
| Timeline |
| LGI Homes |
| EIDESVIK OFFSHORE |
LGI Homes and EIDESVIK OFFSHORE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LGI Homes and EIDESVIK OFFSHORE
The main advantage of trading using opposite LGI Homes and EIDESVIK OFFSHORE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LGI Homes position performs unexpectedly, EIDESVIK OFFSHORE 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 EIDESVIK OFFSHORE will offset losses from the drop in EIDESVIK OFFSHORE's long position.The idea behind LGI Homes and EIDESVIK OFFSHORE NK 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.| EIDESVIK OFFSHORE vs. Apple Inc | EIDESVIK OFFSHORE vs. Apple Inc | EIDESVIK OFFSHORE vs. Apple Inc | EIDESVIK OFFSHORE vs. Apple Inc |
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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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