Correlation Between LGI Homes and FormFactor
Can any of the company-specific risk be diversified away by investing in both LGI Homes and FormFactor 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 FormFactor into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LGI Homes and FormFactor, you can compare the effects of market volatilities on LGI Homes and FormFactor 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 FormFactor. Check out your portfolio center. Please also check ongoing floating volatility patterns of LGI Homes and FormFactor.
Diversification Opportunities for LGI Homes and FormFactor
0.39 | Correlation Coefficient |
Weak diversification
The 3 months correlation between LGI and FormFactor is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding LGI Homes and FormFactor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FormFactor 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 FormFactor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FormFactor has no effect on the direction of LGI Homes i.e., LGI Homes and FormFactor go up and down completely randomly.
Pair Corralation between LGI Homes and FormFactor
Given the investment horizon of 90 days LGI Homes is expected to generate 0.92 times more return on investment than FormFactor. However, LGI Homes is 1.08 times less risky than FormFactor. It trades about 0.16 of its potential returns per unit of risk. FormFactor is currently generating about 0.11 per unit of risk. If you would invest 10,156 in LGI Homes on September 1, 2024 and sell it today you would earn a total of 793.00 from holding LGI Homes or generate 7.81% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
LGI Homes vs. FormFactor
Performance |
| Timeline |
| LGI Homes |
| FormFactor |
LGI Homes and FormFactor Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LGI Homes and FormFactor
The main advantage of trading using opposite LGI Homes and FormFactor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LGI Homes position performs unexpectedly, FormFactor 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 FormFactor will offset losses from the drop in FormFactor'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 |
| FormFactor vs. NXP Semiconductors NV | FormFactor vs. GSI Technology | FormFactor vs. MaxLinear | FormFactor vs. Texas Instruments Incorporated |
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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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