Correlation Between The9 and LGI Homes
Can any of the company-specific risk be diversified away by investing in both The9 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 The9 and LGI Homes into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between The9 Ltd ADR and LGI Homes, you can compare the effects of market volatilities on The9 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 The9 with a short position of LGI Homes. Check out your portfolio center. Please also check ongoing floating volatility patterns of The9 and LGI Homes.
Diversification Opportunities for The9 and LGI Homes
Very good diversification
The 3 months correlation between The9 and LGI is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding The9 Ltd ADR and LGI Homes in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LGI Homes and The9 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 The9 Ltd ADR 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 The9 i.e., The9 and LGI Homes go up and down completely randomly.
Pair Corralation between The9 and LGI Homes
Given the investment horizon of 90 days The9 Ltd ADR is expected to generate 1.66 times more return on investment than LGI Homes. However, The9 is 1.66 times more volatile than LGI Homes. It trades about 0.14 of its potential returns per unit of risk. LGI Homes is currently generating about 0.04 per unit of risk. If you would invest 740.00 in The9 Ltd ADR on September 1, 2024 and sell it today you would earn a total of 735.00 from holding The9 Ltd ADR or generate 99.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
The9 Ltd ADR vs. LGI Homes
Performance |
| Timeline |
| The9 Ltd ADR |
| LGI Homes |
The9 and LGI Homes Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with The9 and LGI Homes
The main advantage of trading using opposite The9 and LGI Homes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if The9 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.| The9 vs. Atari SA | The9 vs. Victory Square Technologies | The9 vs. Motorsport Gaming Us | The9 vs. Alpha Esports Tech |
| 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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