Correlation Between Sto SE and LGI Homes
Specify exactly 2 symbols:
By analyzing existing cross correlation between Sto SE Co and LGI Homes, you can compare the effects of market volatilities on Sto SE 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 Sto SE with a short position of LGI Homes. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sto SE and LGI Homes.
Diversification Opportunities for Sto SE and LGI Homes
Significant diversification
The 3 months correlation between Sto and LGI is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Sto SE Co and LGI Homes in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LGI Homes and Sto SE 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 Sto SE Co 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 Sto SE i.e., Sto SE and LGI Homes go up and down completely randomly.
Pair Corralation between Sto SE and LGI Homes
Assuming the 90 days trading horizon Sto SE Co is expected to under-perform the LGI Homes. But the stock apears to be less risky and, when comparing its historical volatility, Sto SE Co is 1.44 times less risky than LGI Homes. The stock trades about -0.02 of its potential returns per unit of risk. The LGI Homes is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 9,236 in LGI Homes on September 4, 2024 and sell it today you would earn a total of 1,064 from holding LGI Homes or generate 11.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sto SE Co vs. LGI Homes
Performance |
| Timeline |
| Sto SE |
| LGI Homes |
Sto SE and LGI Homes Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sto SE and LGI Homes
The main advantage of trading using opposite Sto SE and LGI Homes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sto SE 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.The idea behind Sto SE Co and LGI Homes pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
Other Complementary Tools
| CEOs Directory Screen CEOs from public companies around the world | |
| My Watchlist Analysis Analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like | |
| Fundamental Analysis View fundamental data based on most recent published financial statements | |
| Funds Screener Find actively-traded funds from around the world traded on over 30 global exchanges | |
| Cryptocurrency Center Build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency |