Correlation Between LGI Homes and Loar Holdings
Can any of the company-specific risk be diversified away by investing in both LGI Homes and Loar Holdings 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 Loar Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LGI Homes and Loar Holdings, you can compare the effects of market volatilities on LGI Homes and Loar Holdings 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 Loar Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of LGI Homes and Loar Holdings.
Diversification Opportunities for LGI Homes and Loar Holdings
-0.59 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between LGI and Loar is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding LGI Homes and Loar Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Loar Holdings 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 Loar Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Loar Holdings has no effect on the direction of LGI Homes i.e., LGI Homes and Loar Holdings go up and down completely randomly.
Pair Corralation between LGI Homes and Loar Holdings
Given the investment horizon of 90 days LGI Homes is expected to under-perform the Loar Holdings. But the stock apears to be less risky and, when comparing its historical volatility, LGI Homes is 1.49 times less risky than Loar Holdings. The stock trades about -0.04 of its potential returns per unit of risk. The Loar Holdings is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest 8,931 in Loar Holdings on September 12, 2024 and sell it today you would lose (162.00) from holding Loar Holdings or give up 1.81% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
LGI Homes vs. Loar Holdings
Performance |
| Timeline |
| LGI Homes |
| Loar Holdings |
LGI Homes and Loar Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LGI Homes and Loar Holdings
The main advantage of trading using opposite LGI Homes and Loar Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LGI Homes position performs unexpectedly, Loar Holdings 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 Loar Holdings will offset losses from the drop in Loar Holdings' 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 |
| Loar Holdings vs. LGI Homes | Loar Holdings vs. Smith Douglas Homes | Loar Holdings vs. Boot Barn Holdings | Loar Holdings vs. Vera Bradley |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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