Correlation Between LGI Homes and Live Ventures

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

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

Diversification Opportunities for LGI Homes and Live Ventures

0.63

Correlation Coefficient

LGI Homes  Live Ventures

Poor diversification

The 3 months correlation between LGI and Live is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding LGI Homes and Live Ventures in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Live Ventures 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 Live Ventures. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Live Ventures has no effect on the direction of LGI Homes i.e., LGI Homes and Live Ventures go up and down completely randomly.

Pair Corralation between LGI Homes and Live Ventures

Given the investment horizon of 90 days LGI Homes is expected to generate 0.62 times more return on investment than Live Ventures. However, LGI Homes is 1.6 times less risky than Live Ventures. It trades about -0.36 of its potential returns per unit of risk. Live Ventures is currently generating about -0.23 per unit of risk. If you would invest  8,514  in LGI Homes on December 5, 2024 and sell it today you would lose (1,406) from holding LGI Homes or give up 16.51% of portfolio value over 90 days.

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

LGI Homes  vs.  Live Ventures

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.

Live Ventures

Risk-Adjusted Performance

Very Weak

Over the last 90 days Live Ventures has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with LGI Homes and Live Ventures

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

The idea behind LGI Homes and Live Ventures 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.