Correlation Between LGI Homes and ServiceNow
Can any of the company-specific risk be diversified away by investing in both LGI Homes and ServiceNow 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 ServiceNow into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LGI Homes and ServiceNow, you can compare the effects of market volatilities on LGI Homes and ServiceNow 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 ServiceNow. Check out your portfolio center. Please also check ongoing floating volatility patterns of LGI Homes and ServiceNow.
Diversification Opportunities for LGI Homes and ServiceNow
-0.28 | Correlation Coefficient |
Very good diversification
The 3 months correlation between LGI and ServiceNow is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding LGI Homes and ServiceNow in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ServiceNow 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 ServiceNow. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ServiceNow has no effect on the direction of LGI Homes i.e., LGI Homes and ServiceNow go up and down completely randomly.
Pair Corralation between LGI Homes and ServiceNow
Given the investment horizon of 90 days LGI Homes is expected to generate 2.85 times less return on investment than ServiceNow. In addition to that, LGI Homes is 1.41 times more volatile than ServiceNow. It trades about 0.05 of its total potential returns per unit of risk. ServiceNow is currently generating about 0.2 per unit of volatility. If you would invest 65,693 in ServiceNow on August 29, 2024 and sell it today you would earn a total of 41,314 from holding ServiceNow or generate 62.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
LGI Homes vs. ServiceNow
Performance |
| Timeline |
| LGI Homes |
| ServiceNow |
LGI Homes and ServiceNow Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LGI Homes and ServiceNow
The main advantage of trading using opposite LGI Homes and ServiceNow positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LGI Homes position performs unexpectedly, ServiceNow 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 ServiceNow will offset losses from the drop in ServiceNow'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 |
| ServiceNow vs. Alkami Technology | ServiceNow vs. ADEIA P | ServiceNow vs. Paycor HCM | ServiceNow vs. Envestnet |
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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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