Correlation Between LGI Homes and Far East

Can any of the company-specific risk be diversified away by investing in both LGI Homes and Far East 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 LGI Homes and Far East into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between LGI Homes and Far East Horizon, you can compare the effects of market volatilities on LGI Homes and Far East 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 LGI Homes with a short position of Far East. Check out your portfolio center. Please also check ongoing floating volatility patterns of LGI Homes and Far East.

Diversification Opportunities for LGI Homes and Far East

0.0

Correlation Coefficient

LGI Homes  Far East

Pay attention - limited upside

The 3 months correlation between LGI and Far is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding LGI Homes and Far East Horizon in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Far East Horizon and LGI Homes 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 LGI Homes are associated (or correlated) with Far East. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Far East Horizon has no effect on the direction of LGI Homes i.e., LGI Homes and Far East go up and down completely randomly.

Pair Corralation between LGI Homes and Far East

If you would invest  9,550  in LGI Homes on September 5, 2024 and sell it today you would earn a total of  750.00  from holding LGI Homes or generate 7.85% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

LGI Homes  vs.  Far East Horizon

LGI Homes

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in LGI Homes are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, LGI Homes may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Far East Horizon

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Far East Horizon has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Far East is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with LGI Homes and Far East

The main advantage of trading using opposite LGI Homes and Far East positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LGI Homes position performs unexpectedly, Far East 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 Far East will offset losses from the drop in Far East's long position.

The idea behind LGI Homes and Far East Horizon 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.