Correlation Between LGI Homes and Calibre Mining
Can any of the company-specific risk be diversified away by investing in both LGI Homes and Calibre Mining 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 Calibre Mining into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LGI Homes and Calibre Mining Corp, you can compare the effects of market volatilities on LGI Homes and Calibre Mining 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 Calibre Mining. Check out your portfolio center. Please also check ongoing floating volatility patterns of LGI Homes and Calibre Mining.
Diversification Opportunities for LGI Homes and Calibre Mining
0.57 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between LGI and Calibre is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding LGI Homes and Calibre Mining Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Calibre Mining Corp 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 Calibre Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Calibre Mining Corp has no effect on the direction of LGI Homes i.e., LGI Homes and Calibre Mining go up and down completely randomly.
Pair Corralation between LGI Homes and Calibre Mining
Assuming the 90 days trading horizon LGI Homes is expected to generate 0.95 times more return on investment than Calibre Mining. However, LGI Homes is 1.05 times less risky than Calibre Mining. It trades about 0.22 of its potential returns per unit of risk. Calibre Mining Corp is currently generating about 0.0 per unit of risk. If you would invest 9,250 in LGI Homes on August 31, 2024 and sell it today you would earn a total of 1,150 from holding LGI Homes or generate 12.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
LGI Homes vs. Calibre Mining Corp
Performance |
| Timeline |
| LGI Homes |
| Calibre Mining Corp |
LGI Homes and Calibre Mining Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LGI Homes and Calibre Mining
The main advantage of trading using opposite LGI Homes and Calibre Mining positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LGI Homes position performs unexpectedly, Calibre Mining 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 Calibre Mining will offset losses from the drop in Calibre Mining's long position.The idea behind LGI Homes and Calibre Mining Corp 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.| Calibre Mining vs. Apple Inc | Calibre Mining vs. Apple Inc | Calibre Mining vs. Apple Inc | Calibre Mining 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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