Correlation Between LGI Homes and FOX P
Can any of the company-specific risk be diversified away by investing in both LGI Homes and FOX P 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 FOX P into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LGI Homes and FOX P B, you can compare the effects of market volatilities on LGI Homes and FOX P 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 FOX P. Check out your portfolio center. Please also check ongoing floating volatility patterns of LGI Homes and FOX P.
Diversification Opportunities for LGI Homes and FOX P
Good diversification
The 3 months correlation between LGI and FOX is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding LGI Homes and FOX P B in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FOX P B 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 FOX P. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FOX P B has no effect on the direction of LGI Homes i.e., LGI Homes and FOX P go up and down completely randomly.
Pair Corralation between LGI Homes and FOX P
Assuming the 90 days trading horizon LGI Homes is expected to under-perform the FOX P. But the stock apears to be less risky and, when comparing its historical volatility, LGI Homes is 1.09 times less risky than FOX P. The stock trades about -0.03 of its potential returns per unit of risk. The FOX P B is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 3,840 in FOX P B on September 12, 2024 and sell it today you would earn a total of 260.00 from holding FOX P B or generate 6.77% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
LGI Homes vs. FOX P B
Performance |
| Timeline |
| LGI Homes |
| FOX P B |
LGI Homes and FOX P Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LGI Homes and FOX P
The main advantage of trading using opposite LGI Homes and FOX P positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LGI Homes position performs unexpectedly, FOX P 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 FOX P will offset losses from the drop in FOX P's long position.The idea behind LGI Homes and FOX P B 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.| FOX P vs. Vivendi SE | FOX P vs. News Corporation | FOX P vs. Prosiebensat 1 Media | FOX P vs. Superior Plus Corp |
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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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