Correlation Between TRAVEL + and LGI Homes
Can any of the company-specific risk be diversified away by investing in both TRAVEL + 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 TRAVEL + and LGI Homes into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between TRAVEL LEISURE DL 01 and LGI Homes, you can compare the effects of market volatilities on TRAVEL + 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 TRAVEL + with a short position of LGI Homes. Check out your portfolio center. Please also check ongoing floating volatility patterns of TRAVEL + and LGI Homes.
Diversification Opportunities for TRAVEL + and LGI Homes
Pay attention - limited upside
The 3 months correlation between TRAVEL and LGI is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding TRAVEL LEISURE DL 01 and LGI Homes in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LGI Homes and TRAVEL + 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 TRAVEL LEISURE DL 01 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 TRAVEL + i.e., TRAVEL + and LGI Homes go up and down completely randomly.
Pair Corralation between TRAVEL + and LGI Homes
Assuming the 90 days trading horizon TRAVEL LEISURE DL 01 is expected to generate 0.68 times more return on investment than LGI Homes. However, TRAVEL LEISURE DL 01 is 1.47 times less risky than LGI Homes. It trades about 0.06 of its potential returns per unit of risk. LGI Homes is currently generating about 0.0 per unit of risk. If you would invest 3,509 in TRAVEL LEISURE DL 01 on September 2, 2024 and sell it today you would earn a total of 1,741 from holding TRAVEL LEISURE DL 01 or generate 49.62% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
TRAVEL LEISURE DL 01 vs. LGI Homes
Performance |
| Timeline |
| TRAVEL LEISURE DL |
| LGI Homes |
TRAVEL + and LGI Homes Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with TRAVEL + and LGI Homes
The main advantage of trading using opposite TRAVEL + and LGI Homes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TRAVEL + 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.| TRAVEL + vs. SENECA FOODS A | TRAVEL + vs. Meiko Electronics Co | TRAVEL + vs. Benchmark Electronics | TRAVEL + vs. ARROW ELECTRONICS |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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