Correlation Between LGI Homes and TERADATA
Can any of the company-specific risk be diversified away by investing in both LGI Homes and TERADATA 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 TERADATA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LGI Homes and TERADATA, you can compare the effects of market volatilities on LGI Homes and TERADATA 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 TERADATA. Check out your portfolio center. Please also check ongoing floating volatility patterns of LGI Homes and TERADATA.
Diversification Opportunities for LGI Homes and TERADATA
Very weak diversification
The 3 months correlation between LGI and TERADATA is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding LGI Homes and TERADATA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TERADATA 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 TERADATA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TERADATA has no effect on the direction of LGI Homes i.e., LGI Homes and TERADATA go up and down completely randomly.
Pair Corralation between LGI Homes and TERADATA
Assuming the 90 days trading horizon LGI Homes is expected to generate 0.95 times more return on investment than TERADATA. However, LGI Homes is 1.05 times less risky than TERADATA. It trades about -0.16 of its potential returns per unit of risk. TERADATA is currently generating about -0.25 per unit of risk. If you would invest 8,400 in LGI Homes on December 2, 2024 and sell it today you would lose (1,350) from holding LGI Homes or give up 16.07% 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. TERADATA
Performance |
Timeline |
LGI Homes |
TERADATA |
LGI Homes and TERADATA Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with LGI Homes and TERADATA
The main advantage of trading using opposite LGI Homes and TERADATA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LGI Homes position performs unexpectedly, TERADATA 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 TERADATA will offset losses from the drop in TERADATA's long position.LGI Homes vs. REINET INVESTMENTS SCA | LGI Homes vs. Take Two Interactive Software | LGI Homes vs. Hastings Technology Metals | LGI Homes vs. Sunny Optical Technology |
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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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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