Correlation Between Skyline and Legacy Housing
Can any of the company-specific risk be diversified away by investing in both Skyline and Legacy Housing 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 Skyline and Legacy Housing into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Skyline and Legacy Housing Corp, you can compare the effects of market volatilities on Skyline and Legacy Housing 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 Skyline with a short position of Legacy Housing. Check out your portfolio center. Please also check ongoing floating volatility patterns of Skyline and Legacy Housing.
Diversification Opportunities for Skyline and Legacy Housing
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Skyline and Legacy is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Skyline and Legacy Housing Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Legacy Housing Corp and Skyline 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 Skyline are associated (or correlated) with Legacy Housing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Legacy Housing Corp has no effect on the direction of Skyline i.e., Skyline and Legacy Housing go up and down completely randomly.
Pair Corralation between Skyline and Legacy Housing
Considering the 90-day investment horizon Skyline is expected to under-perform the Legacy Housing. But the stock apears to be less risky and, when comparing its historical volatility, Skyline is 1.19 times less risky than Legacy Housing. The stock trades about -0.24 of its potential returns per unit of risk. The Legacy Housing Corp is currently generating about -0.19 of returns per unit of risk over similar time horizon. If you would invest 2,730 in Legacy Housing Corp on December 10, 2024 and sell it today you would lose (227.00) from holding Legacy Housing Corp or give up 8.32% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Skyline vs. Legacy Housing Corp
Performance |
| Timeline |
| Skyline |
| Legacy Housing Corp |
Skyline and Legacy Housing Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Skyline and Legacy Housing
The main advantage of trading using opposite Skyline and Legacy Housing positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Skyline position performs unexpectedly, Legacy Housing 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 Legacy Housing will offset losses from the drop in Legacy Housing's long position.| Skyline vs. MI Homes | ||
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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 Transaction History module to view history of all your transactions and understand their impact on performance.
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