Correlation Between LGI Homes and CDW Corp
Can any of the company-specific risk be diversified away by investing in both LGI Homes and CDW Corp 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 CDW Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LGI Homes and CDW Corp, you can compare the effects of market volatilities on LGI Homes and CDW Corp 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 CDW Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of LGI Homes and CDW Corp.
Diversification Opportunities for LGI Homes and CDW Corp
Poor diversification
The 3 months correlation between LGI and CDW is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding LGI Homes and CDW Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CDW 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 CDW Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CDW Corp has no effect on the direction of LGI Homes i.e., LGI Homes and CDW Corp go up and down completely randomly.
Pair Corralation between LGI Homes and CDW Corp
Given the investment horizon of 90 days LGI Homes is expected to generate 0.69 times more return on investment than CDW Corp. However, LGI Homes is 1.44 times less risky than CDW Corp. It trades about -0.02 of its potential returns per unit of risk. CDW Corp is currently generating about -0.27 per unit of risk. If you would invest 10,417 in LGI Homes on August 24, 2024 and sell it today you would lose (144.00) from holding LGI Homes or give up 1.38% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
LGI Homes vs. CDW Corp
Performance |
| Timeline |
| LGI Homes |
| CDW Corp |
LGI Homes and CDW Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LGI Homes and CDW Corp
The main advantage of trading using opposite LGI Homes and CDW Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LGI Homes position performs unexpectedly, CDW Corp 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 CDW Corp will offset losses from the drop in CDW Corp'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 |
| CDW Corp vs. CACI International | CDW Corp vs. Jack Henry Associates | CDW Corp vs. Broadridge Financial Solutions | CDW Corp vs. ExlService Holdings |
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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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