Correlation Between LGI Homes and Nike
Can any of the company-specific risk be diversified away by investing in both LGI Homes and Nike 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 Nike into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LGI Homes and Nike Inc, you can compare the effects of market volatilities on LGI Homes and Nike 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 Nike. Check out your portfolio center. Please also check ongoing floating volatility patterns of LGI Homes and Nike.
Diversification Opportunities for LGI Homes and Nike
Poor diversification
The 3 months correlation between LGI and Nike is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding LGI Homes and Nike Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nike Inc 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 Nike. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nike Inc has no effect on the direction of LGI Homes i.e., LGI Homes and Nike go up and down completely randomly.
Pair Corralation between LGI Homes and Nike
Given the investment horizon of 90 days LGI Homes is expected to generate 1.46 times more return on investment than Nike. However, LGI Homes is 1.46 times more volatile than Nike Inc. It trades about 0.09 of its potential returns per unit of risk. Nike Inc is currently generating about -0.04 per unit of risk. If you would invest 10,461 in LGI Homes on August 29, 2024 and sell it today you would earn a total of 449.00 from holding LGI Homes or generate 4.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
LGI Homes vs. Nike Inc
Performance |
| Timeline |
| LGI Homes |
| Nike Inc |
LGI Homes and Nike Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LGI Homes and Nike
The main advantage of trading using opposite LGI Homes and Nike positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LGI Homes position performs unexpectedly, Nike 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 Nike will offset losses from the drop in Nike'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 |
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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
Other Complementary Tools
| My Watchlist Analysis Analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like | |
| Funds Screener Find actively-traded funds from around the world traded on over 30 global exchanges | |
| Idea Optimizer Use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio | |
| Portfolio Analyzer Portfolio analysis module that provides access to portfolio diagnostics and optimization engine | |
| Risk-Return Analysis View associations between returns expected from investment and the risk you assume |