Correlation Between LGI Homes and Croghan Bancshares
Can any of the company-specific risk be diversified away by investing in both LGI Homes and Croghan Bancshares 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 Croghan Bancshares into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LGI Homes and Croghan Bancshares, you can compare the effects of market volatilities on LGI Homes and Croghan Bancshares 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 Croghan Bancshares. Check out your portfolio center. Please also check ongoing floating volatility patterns of LGI Homes and Croghan Bancshares.
Diversification Opportunities for LGI Homes and Croghan Bancshares
0.0 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between LGI and Croghan is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding LGI Homes and Croghan Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Croghan Bancshares 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 Croghan Bancshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Croghan Bancshares has no effect on the direction of LGI Homes i.e., LGI Homes and Croghan Bancshares go up and down completely randomly.
Pair Corralation between LGI Homes and Croghan Bancshares
Given the investment horizon of 90 days LGI Homes is expected to under-perform the Croghan Bancshares. In addition to that, LGI Homes is 1.57 times more volatile than Croghan Bancshares. It trades about -0.1 of its total potential returns per unit of risk. Croghan Bancshares is currently generating about -0.05 per unit of volatility. If you would invest 4,901 in Croghan Bancshares on October 22, 2024 and sell it today you would lose (151.00) from holding Croghan Bancshares or give up 3.08% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Flat |
Strength | Insignificant |
Accuracy | 97.5% |
Values | Daily Returns |
LGI Homes vs. Croghan Bancshares
Performance |
Timeline |
LGI Homes |
Croghan Bancshares |
LGI Homes and Croghan Bancshares Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with LGI Homes and Croghan Bancshares
The main advantage of trading using opposite LGI Homes and Croghan Bancshares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LGI Homes position performs unexpectedly, Croghan Bancshares 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 Croghan Bancshares will offset losses from the drop in Croghan Bancshares' 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 |
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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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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