Correlation Between Wingstop and LGI Homes
Can any of the company-specific risk be diversified away by investing in both Wingstop 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 Wingstop and LGI Homes into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Wingstop and LGI Homes, you can compare the effects of market volatilities on Wingstop 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 Wingstop with a short position of LGI Homes. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wingstop and LGI Homes.
Diversification Opportunities for Wingstop and LGI Homes
Poor diversification
The 3 months correlation between Wingstop and LGI is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Wingstop and LGI Homes in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LGI Homes and Wingstop 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 Wingstop 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 Wingstop i.e., Wingstop and LGI Homes go up and down completely randomly.
Pair Corralation between Wingstop and LGI Homes
Given the investment horizon of 90 days Wingstop is expected to under-perform the LGI Homes. In addition to that, Wingstop is 2.15 times more volatile than LGI Homes. It trades about -0.05 of its total potential returns per unit of risk. LGI Homes is currently generating about 0.13 per unit of volatility. If you would invest 10,461 in LGI Homes on August 28, 2024 and sell it today you would earn a total of 661.00 from holding LGI Homes or generate 6.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Wingstop vs. LGI Homes
Performance |
| Timeline |
| Wingstop |
| LGI Homes |
Wingstop and LGI Homes Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Wingstop and LGI Homes
The main advantage of trading using opposite Wingstop and LGI Homes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wingstop 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.| Wingstop vs. Papa Johns International | Wingstop vs. Chipotle Mexican Grill | Wingstop vs. The Wendys Co | Wingstop vs. Dominos Pizza |
| LGI Homes vs. Arhaus Inc | LGI Homes vs. Floor Decor Holdings | LGI Homes vs. Kingfisher plc | LGI Homes vs. Haverty Furniture Companies |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
Other Complementary Tools
| Watchlist Optimization Optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm | |
| Transaction History View history of all your transactions and understand their impact on performance | |
| Crypto Correlations Use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins | |
| Positions Ratings Determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
| Portfolio Rebalancing Analyze risk-adjusted returns against different time horizons to find asset-allocation targets |