Correlation Between LGI Homes and SL Green
Can any of the company-specific risk be diversified away by investing in both LGI Homes and SL Green 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 SL Green into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LGI Homes and SL Green Realty, you can compare the effects of market volatilities on LGI Homes and SL Green 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 SL Green. Check out your portfolio center. Please also check ongoing floating volatility patterns of LGI Homes and SL Green.
Diversification Opportunities for LGI Homes and SL Green
Very poor diversification
The 3 months correlation between LGI and SLG is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding LGI Homes and SL Green Realty in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SL Green Realty 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 SL Green. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SL Green Realty has no effect on the direction of LGI Homes i.e., LGI Homes and SL Green go up and down completely randomly.
Pair Corralation between LGI Homes and SL Green
Given the investment horizon of 90 days LGI Homes is expected to under-perform the SL Green. In addition to that, LGI Homes is 1.3 times more volatile than SL Green Realty. It trades about -0.16 of its total potential returns per unit of risk. SL Green Realty is currently generating about -0.06 per unit of volatility. If you would invest 6,784 in SL Green Realty on December 2, 2024 and sell it today you would lose (330.00) from holding SL Green Realty or give up 4.86% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 100.0% |
Values | Daily Returns |
LGI Homes vs. SL Green Realty
Performance |
Timeline |
LGI Homes |
SL Green Realty |
LGI Homes and SL Green Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with LGI Homes and SL Green
The main advantage of trading using opposite LGI Homes and SL Green positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LGI Homes position performs unexpectedly, SL Green 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 SL Green will offset losses from the drop in SL Green's long position.LGI Homes vs. MI Homes | LGI Homes vs. Taylor Morn Home | LGI Homes vs. TRI Pointe Homes | LGI Homes vs. Beazer Homes USA |
SL Green vs. Boston Properties | SL Green vs. Douglas Emmett | SL Green vs. Kilroy Realty Corp | SL Green vs. Alexandria Real Estate |
Check out your portfolio center.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 Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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