Correlation Between LGI Homes and Levi Strauss

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

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

Diversification Opportunities for LGI Homes and Levi Strauss

-0.43

Correlation Coefficient

LGI Homes  Levi Strauss

Very good diversification

The 3 months correlation between LGI and Levi is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding LGI Homes and Levi Strauss Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Levi Strauss 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 Levi Strauss. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Levi Strauss has no effect on the direction of LGI Homes i.e., LGI Homes and Levi Strauss go up and down completely randomly.

Pair Corralation between LGI Homes and Levi Strauss

Given the investment horizon of 90 days LGI Homes is expected to under-perform the Levi Strauss. In addition to that, LGI Homes is 1.27 times more volatile than Levi Strauss Co. It trades about -0.11 of its total potential returns per unit of risk. Levi Strauss Co is currently generating about 0.13 per unit of volatility. If you would invest  1,587  in Levi Strauss Co on November 19, 2024 and sell it today you would earn a total of  240.00  from holding Levi Strauss Co or generate 15.12% return on investment over 90 days.

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

LGI Homes  vs.  Levi Strauss Co

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 March 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Levi Strauss

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Levi Strauss Co are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite fairly uncertain basic indicators, Levi Strauss demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with LGI Homes and Levi Strauss

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

The idea behind LGI Homes and Levi Strauss Co 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.