Correlation Between Pinterest and LGI Homes
Can any of the company-specific risk be diversified away by investing in both Pinterest 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 Pinterest and LGI Homes into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pinterest and LGI Homes, you can compare the effects of market volatilities on Pinterest 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 Pinterest with a short position of LGI Homes. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pinterest and LGI Homes.
Diversification Opportunities for Pinterest and LGI Homes
Modest diversification
The 3 months correlation between Pinterest and LGI is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Pinterest and LGI Homes in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LGI Homes and Pinterest 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 Pinterest 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 Pinterest i.e., Pinterest and LGI Homes go up and down completely randomly.
Pair Corralation between Pinterest and LGI Homes
Given the investment horizon of 90 days Pinterest is expected to under-perform the LGI Homes. In addition to that, Pinterest is 1.51 times more volatile than LGI Homes. It trades about -0.05 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 |
Pinterest vs. LGI Homes
Performance |
| Timeline |
| LGI Homes |
Pinterest and LGI Homes Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pinterest and LGI Homes
The main advantage of trading using opposite Pinterest and LGI Homes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pinterest 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.| Pinterest vs. Alphabet Inc Class C | Pinterest vs. Twilio Inc | Pinterest vs. Snap Inc | Pinterest vs. Baidu Inc |
| 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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