Correlation Between Tianjin Capital and LGI Homes

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

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

Diversification Opportunities for Tianjin Capital and LGI Homes

-0.64

Correlation Coefficient

Tianjin Capital  LGI Homes

Excellent diversification

The 3 months correlation between Tianjin and LGI is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Tianjin Capital Environmental and LGI Homes in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LGI Homes and Tianjin Capital 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 Tianjin Capital Environmental 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 Tianjin Capital i.e., Tianjin Capital and LGI Homes go up and down completely randomly.

Pair Corralation between Tianjin Capital and LGI Homes

If you would invest  38.00  in Tianjin Capital Environmental on September 21, 2024 and sell it today you would earn a total of  0.00  from holding Tianjin Capital Environmental or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

Tianjin Capital Environmental  vs.  LGI Homes

Tianjin Capital Envi

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Tianjin Capital Environmental are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile forward indicators, Tianjin Capital may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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 uncertain 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.

Pair Trading with Tianjin Capital and LGI Homes

The main advantage of trading using opposite Tianjin Capital and LGI Homes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tianjin Capital 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.

The idea behind Tianjin Capital Environmental and LGI Homes 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.