Correlation Between LGI Homes and TAL Education
Can any of the company-specific risk be diversified away by investing in both LGI Homes and TAL Education 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 TAL Education into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LGI Homes and TAL Education Group, you can compare the effects of market volatilities on LGI Homes and TAL Education 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 TAL Education. Check out your portfolio center. Please also check ongoing floating volatility patterns of LGI Homes and TAL Education.
Diversification Opportunities for LGI Homes and TAL Education
0.02 | Correlation Coefficient |
Significant diversification
The 3 months correlation between LGI and TAL is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding LGI Homes and TAL Education Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TAL Education Group 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 TAL Education. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TAL Education Group has no effect on the direction of LGI Homes i.e., LGI Homes and TAL Education go up and down completely randomly.
Pair Corralation between LGI Homes and TAL Education
Assuming the 90 days trading horizon LGI Homes is expected to generate 0.76 times more return on investment than TAL Education. However, LGI Homes is 1.32 times less risky than TAL Education. It trades about 0.15 of its potential returns per unit of risk. TAL Education Group is currently generating about -0.13 per unit of risk. If you would invest 9,550 in LGI Homes on September 5, 2024 and sell it today you would earn a total of 750.00 from holding LGI Homes or generate 7.85% 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. TAL Education Group
Performance |
| Timeline |
| LGI Homes |
| TAL Education Group |
LGI Homes and TAL Education Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LGI Homes and TAL Education
The main advantage of trading using opposite LGI Homes and TAL Education positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LGI Homes position performs unexpectedly, TAL Education 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 TAL Education will offset losses from the drop in TAL Education'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 |
| TAL Education vs. United Rentals | TAL Education vs. MeVis Medical Solutions | TAL Education vs. ONWARD MEDICAL BV | TAL Education vs. UNITED RENTALS |
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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
Other Complementary Tools
| Stock Tickers Use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites | |
| Premium Stories Follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope | |
| Price Transformation Use Price Transformation models to analyze the depth of different equity instruments across global markets | |
| ETFs Find actively traded Exchange Traded Funds (ETF) from around the world | |
| Latest Portfolios Quick portfolio dashboard that showcases your latest portfolios |