Correlation Between LGI Homes and JBG SMITH

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

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

Diversification Opportunities for LGI Homes and JBG SMITH

0.62

Correlation Coefficient

LGI Homes  JBG SMITH

Poor diversification

The 3 months correlation between LGI and JBG is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding LGI Homes and JBG SMITH Properties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JBG SMITH Properties 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 JBG SMITH. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JBG SMITH Properties has no effect on the direction of LGI Homes i.e., LGI Homes and JBG SMITH go up and down completely randomly.

Pair Corralation between LGI Homes and JBG SMITH

Given the investment horizon of 90 days LGI Homes is expected to under-perform the JBG SMITH. In addition to that, LGI Homes is 1.16 times more volatile than JBG SMITH Properties. It trades about 0.0 of its total potential returns per unit of risk. JBG SMITH Properties is currently generating about 0.32 per unit of volatility. If you would invest  1,491  in JBG SMITH Properties on September 17, 2024 and sell it today you would earn a total of  190.00  from holding JBG SMITH Properties or generate 12.74% return on investment over 90 days.

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

LGI Homes  vs.  JBG SMITH Properties

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.

JBG SMITH Properties

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days JBG SMITH Properties has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's technical and fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with LGI Homes and JBG SMITH

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

The idea behind LGI Homes and JBG SMITH Properties 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.