Correlation Between LGI Homes and NervGen Pharma

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

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

Diversification Opportunities for LGI Homes and NervGen Pharma

0.4

Correlation Coefficient

LGI Homes  NervGen Pharma

Very weak diversification

The 3 months correlation between LGI and NervGen is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding LGI Homes and NervGen Pharma Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NervGen Pharma Corp 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 NervGen Pharma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NervGen Pharma Corp has no effect on the direction of LGI Homes i.e., LGI Homes and NervGen Pharma go up and down completely randomly.

Pair Corralation between LGI Homes and NervGen Pharma

Given the investment horizon of 90 days LGI Homes is expected to under-perform the NervGen Pharma. But the stock apears to be less risky and, when comparing its historical volatility, LGI Homes is 2.12 times less risky than NervGen Pharma. The stock trades about -0.05 of its potential returns per unit of risk. The NervGen Pharma Corp is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  188.00  in NervGen Pharma Corp on September 13, 2024 and sell it today you would lose (7.00) from holding NervGen Pharma Corp or give up 3.72% of portfolio value over 90 days.

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

LGI Homes  vs.  NervGen Pharma Corp

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 latest uncertain performance, the Stock's forward indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

NervGen Pharma Corp

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with LGI Homes and NervGen Pharma

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

The idea behind LGI Homes and NervGen Pharma Corp 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.