Correlation Between NL Industries and LGI Homes
Can any of the company-specific risk be diversified away by investing in both NL Industries 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 NL Industries and LGI Homes into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NL Industries and LGI Homes, you can compare the effects of market volatilities on NL Industries 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 NL Industries with a short position of LGI Homes. Check out your portfolio center. Please also check ongoing floating volatility patterns of NL Industries and LGI Homes.
Diversification Opportunities for NL Industries and LGI Homes
-0.15 | Correlation Coefficient |
Good diversification
The 3 months correlation between NL Industries and LGI is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding NL Industries and LGI Homes in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LGI Homes and NL Industries 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 NL Industries 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 NL Industries i.e., NL Industries and LGI Homes go up and down completely randomly.
Pair Corralation between NL Industries and LGI Homes
Allowing for the 90-day total investment horizon NL Industries is expected to generate 27.29 times less return on investment than LGI Homes. In addition to that, NL Industries is 1.6 times more volatile than LGI Homes. It trades about 0.0 of its total potential returns per unit of risk. LGI Homes is currently generating about 0.17 per unit of volatility. If you would invest 10,160 in LGI Homes on August 31, 2024 and sell it today you would earn a total of 870.00 from holding LGI Homes or generate 8.56% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
NL Industries vs. LGI Homes
Performance |
| Timeline |
| NL Industries |
| LGI Homes |
NL Industries and LGI Homes Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NL Industries and LGI Homes
The main advantage of trading using opposite NL Industries and LGI Homes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NL Industries 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.| NL Industries vs. Brinks Company | NL Industries vs. Allegion PLC | NL Industries vs. Resideo Technologies | NL Industries vs. Mistras Group |
| 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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