Correlation Between LGI Homes and Allient
Can any of the company-specific risk be diversified away by investing in both LGI Homes and Allient 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 Allient into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LGI Homes and Allient, you can compare the effects of market volatilities on LGI Homes and Allient 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 Allient. Check out your portfolio center. Please also check ongoing floating volatility patterns of LGI Homes and Allient.
Diversification Opportunities for LGI Homes and Allient
Good diversification
The 3 months correlation between LGI and Allient is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding LGI Homes and Allient in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allient 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 Allient. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Allient has no effect on the direction of LGI Homes i.e., LGI Homes and Allient go up and down completely randomly.
Pair Corralation between LGI Homes and Allient
Given the investment horizon of 90 days LGI Homes is expected to generate 0.95 times more return on investment than Allient. However, LGI Homes is 1.06 times less risky than Allient. It trades about 0.02 of its potential returns per unit of risk. Allient is currently generating about -0.01 per unit of risk. If you would invest 9,569 in LGI Homes on August 30, 2024 and sell it today you would earn a total of 1,461 from holding LGI Homes or generate 15.27% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
LGI Homes vs. Allient
Performance |
| Timeline |
| LGI Homes |
| Allient |
LGI Homes and Allient Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LGI Homes and Allient
The main advantage of trading using opposite LGI Homes and Allient positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LGI Homes position performs unexpectedly, Allient 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 Allient will offset losses from the drop in Allient's long position.| LGI Homes vs. MI Homes | LGI Homes vs. Taylor Morn Home | LGI Homes vs. TRI Pointe Homes | LGI Homes vs. Beazer Homes USA |
| Allient vs. Old Republic International | Allient vs. Cincinnati Financial | Allient vs. Palomar Holdings | Allient vs. Aegean Airlines SA |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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