Correlation Between LGI Homes and Rumble
Can any of the company-specific risk be diversified away by investing in both LGI Homes and Rumble 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 Rumble into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LGI Homes and Rumble Inc, you can compare the effects of market volatilities on LGI Homes and Rumble 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 Rumble. Check out your portfolio center. Please also check ongoing floating volatility patterns of LGI Homes and Rumble.
Diversification Opportunities for LGI Homes and Rumble
Very good diversification
The 3 months correlation between LGI and Rumble is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding LGI Homes and Rumble Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rumble 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 Rumble. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rumble Inc has no effect on the direction of LGI Homes i.e., LGI Homes and Rumble go up and down completely randomly.
Pair Corralation between LGI Homes and Rumble
Given the investment horizon of 90 days LGI Homes is expected to under-perform the Rumble. But the stock apears to be less risky and, when comparing its historical volatility, LGI Homes is 3.12 times less risky than Rumble. The stock trades about -0.02 of its potential returns per unit of risk. The Rumble Inc is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 560.00 in Rumble Inc on August 24, 2024 and sell it today you would earn a total of 43.00 from holding Rumble Inc or generate 7.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
LGI Homes vs. Rumble Inc
Performance |
| Timeline |
| LGI Homes |
| Rumble Inc |
LGI Homes and Rumble Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LGI Homes and Rumble
The main advantage of trading using opposite LGI Homes and Rumble positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LGI Homes position performs unexpectedly, Rumble 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 Rumble will offset losses from the drop in Rumble'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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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