Correlation Between Reservoir Media and LGI Homes
Can any of the company-specific risk be diversified away by investing in both Reservoir Media 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 Reservoir Media and LGI Homes into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Reservoir Media and LGI Homes, you can compare the effects of market volatilities on Reservoir Media 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 Reservoir Media with a short position of LGI Homes. Check out your portfolio center. Please also check ongoing floating volatility patterns of Reservoir Media and LGI Homes.
Diversification Opportunities for Reservoir Media and LGI Homes
-0.46 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Reservoir and LGI is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Reservoir Media and LGI Homes in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LGI Homes and Reservoir Media 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 Reservoir Media 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 Reservoir Media i.e., Reservoir Media and LGI Homes go up and down completely randomly.
Pair Corralation between Reservoir Media and LGI Homes
Given the investment horizon of 90 days Reservoir Media is expected to generate 0.81 times more return on investment than LGI Homes. However, Reservoir Media is 1.23 times less risky than LGI Homes. It trades about 0.05 of its potential returns per unit of risk. LGI Homes is currently generating about 0.01 per unit of risk. If you would invest 615.00 in Reservoir Media on September 23, 2024 and sell it today you would earn a total of 311.00 from holding Reservoir Media or generate 50.57% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Reservoir Media vs. LGI Homes
Performance |
Timeline |
Reservoir Media |
LGI Homes |
Reservoir Media and LGI Homes Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Reservoir Media and LGI Homes
The main advantage of trading using opposite Reservoir Media and LGI Homes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Reservoir Media 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.Reservoir Media vs. Warner Bros Discovery | Reservoir Media vs. Paramount Global Class | Reservoir Media vs. Live Nation Entertainment | Reservoir Media vs. iQIYI Inc |
LGI Homes vs. TRI Pointe Homes | LGI Homes vs. Beazer Homes USA | LGI Homes vs. Meritage | LGI Homes vs. Taylor Morn Home |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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