Correlation Between LGI Homes and Skyline
Can any of the company-specific risk be diversified away by investing in both LGI Homes and Skyline 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 Skyline into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LGI Homes and Skyline, you can compare the effects of market volatilities on LGI Homes and Skyline 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 Skyline. Check out your portfolio center. Please also check ongoing floating volatility patterns of LGI Homes and Skyline.
Diversification Opportunities for LGI Homes and Skyline
Weak diversification
The 3 months correlation between LGI and Skyline is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding LGI Homes and Skyline in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Skyline 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 Skyline. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Skyline has no effect on the direction of LGI Homes i.e., LGI Homes and Skyline go up and down completely randomly.
Pair Corralation between LGI Homes and Skyline
Given the investment horizon of 90 days LGI Homes is expected to under-perform the Skyline. In addition to that, LGI Homes is 1.27 times more volatile than Skyline. It trades about -0.02 of its total potential returns per unit of risk. Skyline is currently generating about 0.29 per unit of volatility. If you would invest 9,015 in Skyline on August 24, 2024 and sell it today you would earn a total of 993.00 from holding Skyline or generate 11.01% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
LGI Homes vs. Skyline
Performance |
Timeline |
LGI Homes |
Skyline |
LGI Homes and Skyline Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with LGI Homes and Skyline
The main advantage of trading using opposite LGI Homes and Skyline positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LGI Homes position performs unexpectedly, Skyline 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 Skyline will offset losses from the drop in Skyline'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 |
Skyline vs. MI Homes | Skyline vs. Century Communities | Skyline vs. Installed Building Products | Skyline vs. Legacy Housing Corp |
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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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