Correlation Between LGI Homes and HeidelbergCement
Can any of the company-specific risk be diversified away by investing in both LGI Homes and HeidelbergCement 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 HeidelbergCement into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LGI Homes and HeidelbergCement AG, you can compare the effects of market volatilities on LGI Homes and HeidelbergCement 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 HeidelbergCement. Check out your portfolio center. Please also check ongoing floating volatility patterns of LGI Homes and HeidelbergCement.
Diversification Opportunities for LGI Homes and HeidelbergCement
0.06 | Correlation Coefficient |
Significant diversification
The 3 months correlation between LGI and HeidelbergCement is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding LGI Homes and HeidelbergCement AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HeidelbergCement 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 HeidelbergCement. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HeidelbergCement has no effect on the direction of LGI Homes i.e., LGI Homes and HeidelbergCement go up and down completely randomly.
Pair Corralation between LGI Homes and HeidelbergCement
Assuming the 90 days trading horizon LGI Homes is expected to generate 3.7 times less return on investment than HeidelbergCement. In addition to that, LGI Homes is 1.89 times more volatile than HeidelbergCement AG. It trades about 0.02 of its total potential returns per unit of risk. HeidelbergCement AG is currently generating about 0.13 per unit of volatility. If you would invest 4,864 in HeidelbergCement AG on September 5, 2024 and sell it today you would earn a total of 7,336 from holding HeidelbergCement AG or generate 150.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 99.8% |
| Values | Daily Returns |
LGI Homes vs. HeidelbergCement AG
Performance |
| Timeline |
| LGI Homes |
| HeidelbergCement |
LGI Homes and HeidelbergCement Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LGI Homes and HeidelbergCement
The main advantage of trading using opposite LGI Homes and HeidelbergCement positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LGI Homes position performs unexpectedly, HeidelbergCement 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 HeidelbergCement will offset losses from the drop in HeidelbergCement's long position.| LGI Homes vs. BJs Wholesale Club | LGI Homes vs. ADRIATIC METALS LS 013355 | LGI Homes vs. SPARTAN STORES | LGI Homes vs. QURATE RETAIL INC |
| HeidelbergCement vs. Autohome ADR | HeidelbergCement vs. INVITATION HOMES DL | HeidelbergCement vs. United Utilities Group | HeidelbergCement vs. PKSHA TECHNOLOGY 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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