Correlation Between LGI Homes and Evolution Mining
Can any of the company-specific risk be diversified away by investing in both LGI Homes and Evolution 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 Evolution 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 Evolution Mining Limited, you can compare the effects of market volatilities on LGI Homes and Evolution 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 Evolution Mining. Check out your portfolio center. Please also check ongoing floating volatility patterns of LGI Homes and Evolution Mining.
Diversification Opportunities for LGI Homes and Evolution Mining
0.1 | Correlation Coefficient |
Average diversification
The 3 months correlation between LGI and Evolution is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding LGI Homes and Evolution Mining Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Evolution Mining 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 Evolution Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Evolution Mining has no effect on the direction of LGI Homes i.e., LGI Homes and Evolution Mining go up and down completely randomly.
Pair Corralation between LGI Homes and Evolution Mining
Assuming the 90 days trading horizon LGI Homes is expected to generate 2.66 times less return on investment than Evolution Mining. In addition to that, LGI Homes is 1.16 times more volatile than Evolution Mining Limited. It trades about 0.05 of its total potential returns per unit of risk. Evolution Mining Limited is currently generating about 0.16 per unit of volatility. If you would invest 251.00 in Evolution Mining Limited on September 2, 2024 and sell it today you would earn a total of 64.00 from holding Evolution Mining Limited or generate 25.5% 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. Evolution Mining Limited
Performance |
| Timeline |
| LGI Homes |
| Evolution Mining |
LGI Homes and Evolution Mining Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LGI Homes and Evolution Mining
The main advantage of trading using opposite LGI Homes and Evolution Mining positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LGI Homes position performs unexpectedly, Evolution 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 Evolution Mining will offset losses from the drop in Evolution Mining's long position.The idea behind LGI Homes and Evolution Mining Limited 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.| Evolution Mining vs. ZIJIN MINH UNSPADR20 | Evolution Mining vs. Superior Plus Corp | Evolution Mining vs. NMI Holdings | Evolution Mining vs. Origin Agritech |
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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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