Correlation Between LGI Homes and SunLink Health
Can any of the company-specific risk be diversified away by investing in both LGI Homes and SunLink Health 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 SunLink Health into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LGI Homes and SunLink Health Systems, you can compare the effects of market volatilities on LGI Homes and SunLink Health 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 SunLink Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of LGI Homes and SunLink Health.
Diversification Opportunities for LGI Homes and SunLink Health
-0.15 | Correlation Coefficient |
Good diversification
The 3 months correlation between LGI and SunLink is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding LGI Homes and SunLink Health Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SunLink Health Systems 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 SunLink Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SunLink Health Systems has no effect on the direction of LGI Homes i.e., LGI Homes and SunLink Health go up and down completely randomly.
Pair Corralation between LGI Homes and SunLink Health
Given the investment horizon of 90 days LGI Homes is expected to generate 0.43 times more return on investment than SunLink Health. However, LGI Homes is 2.3 times less risky than SunLink Health. It trades about -0.02 of its potential returns per unit of risk. SunLink Health Systems is currently generating about -0.05 per unit of risk. If you would invest 10,393 in LGI Homes on September 14, 2024 and sell it today you would lose (154.00) from holding LGI Homes or give up 1.48% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
LGI Homes vs. SunLink Health Systems
Performance |
| Timeline |
| LGI Homes |
| SunLink Health Systems |
LGI Homes and SunLink Health Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LGI Homes and SunLink Health
The main advantage of trading using opposite LGI Homes and SunLink Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LGI Homes position performs unexpectedly, SunLink Health 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 SunLink Health will offset losses from the drop in SunLink Health'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 |
| SunLink Health vs. ASGN Inc | SunLink Health vs. Kforce Inc | SunLink Health vs. Kelly Services A | SunLink Health vs. AMN Healthcare Services |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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