Correlation Between LGI Homes and BJs Wholesale
Can any of the company-specific risk be diversified away by investing in both LGI Homes and BJs Wholesale 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 BJs Wholesale into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LGI Homes and BJs Wholesale Club, you can compare the effects of market volatilities on LGI Homes and BJs Wholesale 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 BJs Wholesale. Check out your portfolio center. Please also check ongoing floating volatility patterns of LGI Homes and BJs Wholesale.
Diversification Opportunities for LGI Homes and BJs Wholesale
-0.6 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between LGI and BJs is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding LGI Homes and BJs Wholesale Club in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BJs Wholesale Club 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 BJs Wholesale. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BJs Wholesale Club has no effect on the direction of LGI Homes i.e., LGI Homes and BJs Wholesale go up and down completely randomly.
Pair Corralation between LGI Homes and BJs Wholesale
Assuming the 90 days trading horizon LGI Homes is expected to under-perform the BJs Wholesale. In addition to that, LGI Homes is 1.0 times more volatile than BJs Wholesale Club. It trades about -0.17 of its total potential returns per unit of risk. BJs Wholesale Club is currently generating about 0.1 per unit of volatility. If you would invest 8,850 in BJs Wholesale Club on December 27, 2024 and sell it today you would earn a total of 1,150 from holding BJs Wholesale Club or generate 12.99% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
LGI Homes vs. BJs Wholesale Club
Performance |
Timeline |
LGI Homes |
BJs Wholesale Club |
LGI Homes and BJs Wholesale Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with LGI Homes and BJs Wholesale
The main advantage of trading using opposite LGI Homes and BJs Wholesale positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LGI Homes position performs unexpectedly, BJs Wholesale 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 BJs Wholesale will offset losses from the drop in BJs Wholesale's long position.LGI Homes vs. SPARTAN STORES | LGI Homes vs. Transport International Holdings | LGI Homes vs. PICKN PAY STORES | LGI Homes vs. TEXAS ROADHOUSE |
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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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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