Correlation Between Scientific Games and LGI Homes
Can any of the company-specific risk be diversified away by investing in both Scientific Games 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 Scientific Games and LGI Homes into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Scientific Games and LGI Homes, you can compare the effects of market volatilities on Scientific Games 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 Scientific Games with a short position of LGI Homes. Check out your portfolio center. Please also check ongoing floating volatility patterns of Scientific Games and LGI Homes.
Diversification Opportunities for Scientific Games and LGI Homes
-0.44 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Scientific and LGI is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Scientific Games and LGI Homes in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LGI Homes and Scientific Games 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 Scientific Games 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 Scientific Games i.e., Scientific Games and LGI Homes go up and down completely randomly.
Pair Corralation between Scientific Games and LGI Homes
Assuming the 90 days horizon Scientific Games is expected to generate 1.07 times more return on investment than LGI Homes. However, Scientific Games is 1.07 times more volatile than LGI Homes. It trades about 0.14 of its potential returns per unit of risk. LGI Homes is currently generating about -0.13 per unit of risk. If you would invest 8,200 in Scientific Games on December 11, 2024 and sell it today you would earn a total of 1,300 from holding Scientific Games or generate 15.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Scientific Games vs. LGI Homes
Performance |
| Timeline |
| Scientific Games |
| LGI Homes |
Scientific Games and LGI Homes Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Scientific Games and LGI Homes
The main advantage of trading using opposite Scientific Games and LGI Homes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Scientific Games 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.| Scientific Games vs. FAST RETAIL ADR | Scientific Games vs. SALESFORCE INC CDR | Scientific Games vs. CARSALESCOM | Scientific Games vs. ZhongAn Online P |
| LGI Homes vs. Constellation Software | LGI Homes vs. Automatic Data Processing | LGI Homes vs. DICKER DATA LTD | LGI Homes vs. OPERA SOFTWARE |
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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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