Correlation Between LGI Homes and SNDL
Can any of the company-specific risk be diversified away by investing in both LGI Homes and SNDL 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 SNDL into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LGI Homes and SNDL Inc, you can compare the effects of market volatilities on LGI Homes and SNDL 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 SNDL. Check out your portfolio center. Please also check ongoing floating volatility patterns of LGI Homes and SNDL.
Diversification Opportunities for LGI Homes and SNDL
Good diversification
The 3 months correlation between LGI and SNDL is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding LGI Homes and SNDL Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SNDL 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 SNDL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SNDL Inc has no effect on the direction of LGI Homes i.e., LGI Homes and SNDL go up and down completely randomly.
Pair Corralation between LGI Homes and SNDL
Given the investment horizon of 90 days LGI Homes is expected to generate 0.95 times more return on investment than SNDL. However, LGI Homes is 1.05 times less risky than SNDL. It trades about 0.04 of its potential returns per unit of risk. SNDL Inc is currently generating about -0.01 per unit of risk. If you would invest 9,500 in LGI Homes on August 24, 2024 and sell it today you would earn a total of 773.00 from holding LGI Homes or generate 8.14% 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. SNDL Inc
Performance |
| Timeline |
| LGI Homes |
| SNDL Inc |
LGI Homes and SNDL Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LGI Homes and SNDL
The main advantage of trading using opposite LGI Homes and SNDL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LGI Homes position performs unexpectedly, SNDL 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 SNDL will offset losses from the drop in SNDL'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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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