Correlation Between LGI Homes and ELMOS SEMICONDUCTOR

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

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

Diversification Opportunities for LGI Homes and ELMOS SEMICONDUCTOR

-0.12

Correlation Coefficient

LGI Homes  ELMOS SEMICONDUCTOR

Good diversification

The 3 months correlation between LGI and ELMOS is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding LGI Homes and ELMOS SEMICONDUCTOR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ELMOS SEMICONDUCTOR 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 ELMOS SEMICONDUCTOR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ELMOS SEMICONDUCTOR has no effect on the direction of LGI Homes i.e., LGI Homes and ELMOS SEMICONDUCTOR go up and down completely randomly.

Pair Corralation between LGI Homes and ELMOS SEMICONDUCTOR

Assuming the 90 days trading horizon LGI Homes is expected to generate 0.81 times more return on investment than ELMOS SEMICONDUCTOR. However, LGI Homes is 1.24 times less risky than ELMOS SEMICONDUCTOR. It trades about 0.05 of its potential returns per unit of risk. ELMOS SEMICONDUCTOR is currently generating about -0.12 per unit of risk. If you would invest  9,700  in LGI Homes on August 31, 2024 and sell it today you would earn a total of  700.00  from holding LGI Homes or generate 7.22% return on investment over 90 days.

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

LGI Homes  vs.  ELMOS SEMICONDUCTOR

LGI Homes

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in LGI Homes are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, LGI Homes may actually be approaching a critical reversion point that can send shares even higher in December 2024.

ELMOS SEMICONDUCTOR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ELMOS SEMICONDUCTOR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in December 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with LGI Homes and ELMOS SEMICONDUCTOR

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

The idea behind LGI Homes and ELMOS SEMICONDUCTOR 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.