Correlation Between LGI Homes and Hooker Furniture

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

By analyzing existing cross correlation between LGI Homes and Hooker Furniture, you can compare the effects of market volatilities on LGI Homes and Hooker Furniture 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 Hooker Furniture. Check out your portfolio center. Please also check ongoing floating volatility patterns of LGI Homes and Hooker Furniture.

Diversification Opportunities for LGI Homes and Hooker Furniture

0.19

Correlation Coefficient

LGI Homes  Hooker Furniture

Average diversification

The 3 months correlation between LGI and Hooker is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding LGI Homes and Hooker Furniture in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hooker Furniture 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 Hooker Furniture. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hooker Furniture has no effect on the direction of LGI Homes i.e., LGI Homes and Hooker Furniture go up and down completely randomly.

Pair Corralation between LGI Homes and Hooker Furniture

Given the investment horizon of 90 days LGI Homes is expected to under-perform the Hooker Furniture. But the stock apears to be less risky and, when comparing its historical volatility, LGI Homes is 1.4 times less risky than Hooker Furniture. The stock trades about -0.1 of its potential returns per unit of risk. The Hooker Furniture is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  1,689  in Hooker Furniture on September 14, 2024 and sell it today you would earn a total of  15.00  from holding Hooker Furniture or generate 0.89% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

LGI Homes  vs.  Hooker Furniture

LGI Homes

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LGI Homes has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's forward indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Hooker Furniture

Risk-Adjusted Performance

1 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Hooker Furniture are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, Hooker Furniture is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with LGI Homes and Hooker Furniture

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

The idea behind LGI Homes and Hooker Furniture 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.

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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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.