Correlation Between LGI Homes and Allkem
Can any of the company-specific risk be diversified away by investing in both LGI Homes and Allkem 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 Allkem into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LGI Homes and Allkem, you can compare the effects of market volatilities on LGI Homes and Allkem 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 Allkem. Check out your portfolio center. Please also check ongoing floating volatility patterns of LGI Homes and Allkem.
Diversification Opportunities for LGI Homes and Allkem
Good diversification
The 3 months correlation between LGI and Allkem is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding LGI Homes and Allkem in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allkem 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 Allkem. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Allkem has no effect on the direction of LGI Homes i.e., LGI Homes and Allkem go up and down completely randomly.
Pair Corralation between LGI Homes and Allkem
Given the investment horizon of 90 days LGI Homes is expected to generate 1.2 times more return on investment than Allkem. However, LGI Homes is 1.2 times more volatile than Allkem. It trades about 0.0 of its potential returns per unit of risk. Allkem is currently generating about -0.06 per unit of risk. If you would invest 13,220 in LGI Homes on September 2, 2024 and sell it today you would lose (2,271) from holding LGI Homes or give up 17.18% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 8.06% |
| Values | Daily Returns |
LGI Homes vs. Allkem
Performance |
| Timeline |
| LGI Homes |
| Allkem |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
LGI Homes and Allkem Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LGI Homes and Allkem
The main advantage of trading using opposite LGI Homes and Allkem positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LGI Homes position performs unexpectedly, Allkem 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 Allkem will offset losses from the drop in Allkem'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 |
| Allkem vs. Ryman Hospitality Properties | Allkem vs. Dennys Corp | Allkem vs. NioCorp Developments Ltd | Allkem vs. Getty Copper |
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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