Correlation Between Skyline and LGI Homes
Can any of the company-specific risk be diversified away by investing in both Skyline 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 Skyline and LGI Homes into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Skyline and LGI Homes, you can compare the effects of market volatilities on Skyline 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 Skyline with a short position of LGI Homes. Check out your portfolio center. Please also check ongoing floating volatility patterns of Skyline and LGI Homes.
Diversification Opportunities for Skyline and LGI Homes
Weak diversification
The 3 months correlation between Skyline and LGI is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Skyline and LGI Homes in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LGI Homes 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 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 Skyline i.e., Skyline and LGI Homes go up and down completely randomly.
Pair Corralation between Skyline and LGI Homes
Considering the 90-day investment horizon Skyline is expected to generate 0.79 times more return on investment than LGI Homes. However, Skyline is 1.27 times less risky than LGI Homes. It trades about 0.29 of its potential returns per unit of risk. LGI Homes is currently generating about -0.02 per unit of risk. If you would invest 9,015 in Skyline on August 24, 2024 and sell it today you would earn a total of 993.00 from holding Skyline or generate 11.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Skyline vs. LGI Homes
Performance |
| Timeline |
| Skyline |
| LGI Homes |
Skyline and LGI Homes Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Skyline and LGI Homes
The main advantage of trading using opposite Skyline and LGI Homes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Skyline 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.| Skyline vs. MI Homes | Skyline vs. Century Communities | Skyline vs. Installed Building Products | Skyline vs. Legacy Housing Corp |
| 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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