Correlation Between LGI Homes and SUPER HI

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

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

Diversification Opportunities for LGI Homes and SUPER HI

0.08

Correlation Coefficient

LGI Homes  SUPER HI

Significant diversification

The 3 months correlation between LGI and SUPER is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding LGI Homes and SUPER HI INTERNATIONAL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SUPER HI INTERNATIONAL 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 SUPER HI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SUPER HI INTERNATIONAL has no effect on the direction of LGI Homes i.e., LGI Homes and SUPER HI go up and down completely randomly.

Pair Corralation between LGI Homes and SUPER HI

Given the investment horizon of 90 days LGI Homes is expected to under-perform the SUPER HI. But the stock apears to be less risky and, when comparing its historical volatility, LGI Homes is 1.53 times less risky than SUPER HI. The stock trades about -0.15 of its potential returns per unit of risk. The SUPER HI INTERNATIONAL is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  2,872  in SUPER HI INTERNATIONAL on December 19, 2024 and sell it today you would lose (228.00) from holding SUPER HI INTERNATIONAL or give up 7.94% of portfolio value over 90 days.

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

LGI Homes  vs.  SUPER HI INTERNATIONAL

LGI Homes

Risk-Adjusted Performance

Very Weak

Over the last 90 days LGI Homes has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's forward indicators remain fairly strong which may send shares a bit higher in April 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

SUPER HI INTERNATIONAL

Risk-Adjusted Performance

Very Weak

Over the last 90 days SUPER HI INTERNATIONAL has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent fundamental indicators, SUPER HI is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with LGI Homes and SUPER HI

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

The idea behind LGI Homes and SUPER HI INTERNATIONAL 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.