Correlation Between LGI Homes and Stratasys
Can any of the company-specific risk be diversified away by investing in both LGI Homes and Stratasys 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 Stratasys into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LGI Homes and Stratasys, you can compare the effects of market volatilities on LGI Homes and Stratasys 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 Stratasys. Check out your portfolio center. Please also check ongoing floating volatility patterns of LGI Homes and Stratasys.
Diversification Opportunities for LGI Homes and Stratasys
Good diversification
The 3 months correlation between LGI and Stratasys is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding LGI Homes and Stratasys in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stratasys 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 Stratasys. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stratasys has no effect on the direction of LGI Homes i.e., LGI Homes and Stratasys go up and down completely randomly.
Pair Corralation between LGI Homes and Stratasys
Given the investment horizon of 90 days LGI Homes is expected to generate 1.18 times less return on investment than Stratasys. But when comparing it to its historical volatility, LGI Homes is 1.3 times less risky than Stratasys. It trades about 0.04 of its potential returns per unit of risk. Stratasys is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 867.00 in Stratasys on September 1, 2024 and sell it today you would earn a total of 95.00 from holding Stratasys or generate 10.96% 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. Stratasys
Performance |
| Timeline |
| LGI Homes |
| Stratasys |
LGI Homes and Stratasys Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LGI Homes and Stratasys
The main advantage of trading using opposite LGI Homes and Stratasys positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LGI Homes position performs unexpectedly, Stratasys 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 Stratasys will offset losses from the drop in Stratasys' 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 |
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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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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