Correlation Between LGI Homes and JBG SMITH
Can any of the company-specific risk be diversified away by investing in both LGI Homes and JBG SMITH 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 JBG SMITH into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LGI Homes and JBG SMITH Properties, you can compare the effects of market volatilities on LGI Homes and JBG SMITH 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 JBG SMITH. Check out your portfolio center. Please also check ongoing floating volatility patterns of LGI Homes and JBG SMITH.
Diversification Opportunities for LGI Homes and JBG SMITH
Very weak diversification
The 3 months correlation between LGI and JBG is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding LGI Homes and JBG SMITH Properties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JBG SMITH Properties 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 JBG SMITH. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JBG SMITH Properties has no effect on the direction of LGI Homes i.e., LGI Homes and JBG SMITH go up and down completely randomly.
Pair Corralation between LGI Homes and JBG SMITH
Given the investment horizon of 90 days LGI Homes is expected to under-perform the JBG SMITH. In addition to that, LGI Homes is 1.44 times more volatile than JBG SMITH Properties. It trades about 0.0 of its total potential returns per unit of risk. JBG SMITH Properties is currently generating about 0.05 per unit of volatility. If you would invest 1,316 in JBG SMITH Properties on August 24, 2024 and sell it today you would earn a total of 314.00 from holding JBG SMITH Properties or generate 23.86% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
LGI Homes vs. JBG SMITH Properties
Performance |
| Timeline |
| LGI Homes |
| JBG SMITH Properties |
LGI Homes and JBG SMITH Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LGI Homes and JBG SMITH
The main advantage of trading using opposite LGI Homes and JBG SMITH positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LGI Homes position performs unexpectedly, JBG SMITH 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 JBG SMITH will offset losses from the drop in JBG SMITH'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 |
| JBG SMITH vs. Cousins Properties Incorporated | JBG SMITH vs. Highwoods Properties | JBG SMITH vs. Douglas Emmett | JBG SMITH vs. Equity Commonwealth |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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