Correlation Between LGI Homes and HNI Corp
Can any of the company-specific risk be diversified away by investing in both LGI Homes and HNI 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 HNI 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 HNI Corp, you can compare the effects of market volatilities on LGI Homes and HNI 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 HNI Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of LGI Homes and HNI Corp.
Diversification Opportunities for LGI Homes and HNI Corp
Average diversification
The 3 months correlation between LGI and HNI is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding LGI Homes and HNI Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HNI 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 HNI Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HNI Corp has no effect on the direction of LGI Homes i.e., LGI Homes and HNI Corp go up and down completely randomly.
Pair Corralation between LGI Homes and HNI Corp
Given the investment horizon of 90 days LGI Homes is expected to generate 5.51 times less return on investment than HNI Corp. In addition to that, LGI Homes is 1.19 times more volatile than HNI Corp. It trades about 0.04 of its total potential returns per unit of risk. HNI Corp is currently generating about 0.23 per unit of volatility. If you would invest 5,152 in HNI Corp on August 27, 2024 and sell it today you would earn a total of 465.00 from holding HNI Corp or generate 9.03% 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. HNI Corp
Performance |
| Timeline |
| LGI Homes |
| HNI Corp |
LGI Homes and HNI Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LGI Homes and HNI Corp
The main advantage of trading using opposite LGI Homes and HNI Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LGI Homes position performs unexpectedly, HNI 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 HNI Corp will offset losses from the drop in HNI Corp's long position.| LGI Homes vs. Arhaus Inc | LGI Homes vs. Floor Decor Holdings | LGI Homes vs. Kingfisher plc | LGI Homes vs. Haverty Furniture Companies |
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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.
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