Correlation Between Microbot Medical and LGI Homes

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

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

Diversification Opportunities for Microbot Medical and LGI Homes

-0.42

Correlation Coefficient

Microbot Medical  LGI Homes

Very good diversification

The 3 months correlation between Microbot and LGI is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Microbot Medical and LGI Homes in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LGI Homes and Microbot Medical 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 Microbot Medical are associated (or correlated) with LGI Homes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LGI Homes has no effect on the direction of Microbot Medical i.e., Microbot Medical and LGI Homes go up and down completely randomly.

Pair Corralation between Microbot Medical and LGI Homes

Given the investment horizon of 90 days Microbot Medical is expected to generate 5.25 times more return on investment than LGI Homes. However, Microbot Medical is 5.25 times more volatile than LGI Homes. It trades about 0.16 of its potential returns per unit of risk. LGI Homes is currently generating about -0.16 per unit of risk. If you would invest  92.00  in Microbot Medical on October 7, 2024 and sell it today you would earn a total of  122.00  from holding Microbot Medical or generate 132.61% return on investment over 90 days.

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

Microbot Medical  vs.  LGI Homes

Microbot Medical

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Microbot Medical are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Microbot Medical unveiled solid returns over the last few months and may actually be approaching a breakup point.

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 unfluctuating performance in the last few months, the Stock's forward indicators remain fairly strong which may send shares a bit higher in February 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Microbot Medical and LGI Homes

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

The idea behind Microbot Medical and LGI Homes 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.