Correlation Between NioCorp Developments and LGI Homes
Can any of the company-specific risk be diversified away by investing in both NioCorp Developments and LGI Homes 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 NioCorp Developments and LGI Homes into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NioCorp Developments Ltd and LGI Homes, you can compare the effects of market volatilities on NioCorp Developments and LGI Homes 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 NioCorp Developments with a short position of LGI Homes. Check out your portfolio center. Please also check ongoing floating volatility patterns of NioCorp Developments and LGI Homes.
Diversification Opportunities for NioCorp Developments and LGI Homes
0.32 | Correlation Coefficient |
Weak diversification
The 3 months correlation between NioCorp and LGI is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding NioCorp Developments Ltd and LGI Homes in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LGI Homes and NioCorp Developments 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 NioCorp Developments Ltd are associated (or correlated) with LGI Homes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LGI Homes has no effect on the direction of NioCorp Developments i.e., NioCorp Developments and LGI Homes go up and down completely randomly.
Pair Corralation between NioCorp Developments and LGI Homes
Allowing for the 90-day total investment horizon NioCorp Developments Ltd is expected to under-perform the LGI Homes. In addition to that, NioCorp Developments is 1.5 times more volatile than LGI Homes. It trades about -0.43 of its total potential returns per unit of risk. LGI Homes is currently generating about 0.13 per unit of volatility. If you would invest 10,461 in LGI Homes on August 28, 2024 and sell it today you would earn a total of 661.00 from holding LGI Homes or generate 6.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
NioCorp Developments Ltd vs. LGI Homes
Performance |
| Timeline |
| NioCorp Developments |
| LGI Homes |
NioCorp Developments and LGI Homes Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NioCorp Developments and LGI Homes
The main advantage of trading using opposite NioCorp Developments and LGI Homes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NioCorp Developments position performs unexpectedly, LGI Homes 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 LGI Homes will offset losses from the drop in LGI Homes' long position.| NioCorp Developments vs. Vale SA ADR | NioCorp Developments vs. Teck Resources Ltd | NioCorp Developments vs. BHP Group Limited | NioCorp Developments vs. Glencore PLC ADR |
| LGI Homes vs. Arhaus Inc | LGI Homes vs. Floor Decor Holdings | LGI Homes vs. Kingfisher plc | LGI Homes vs. Haverty Furniture Companies |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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