Correlation Between NCR Corp and LGI Homes

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

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

Diversification Opportunities for NCR Corp and LGI Homes

-0.32

Correlation Coefficient

NCR Corp  LGI Homes

Very good diversification

The 3 months correlation between NCR and LGI is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding NCR Corp Pref and LGI Homes in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LGI Homes and NCR Corp 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 NCR Corp Pref 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 NCR Corp i.e., NCR Corp and LGI Homes go up and down completely randomly.

Pair Corralation between NCR Corp and LGI Homes

If you would invest  9,600  in LGI Homes on September 28, 2024 and sell it today you would lose (498.00) from holding LGI Homes or give up 5.19% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	43.15%
Values	Daily Returns

NCR Corp Pref  vs.  LGI Homes

NCR Corp Pref

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NCR Corp Pref has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, NCR Corp is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

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 inconsistent 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.

Pair Trading with NCR Corp and LGI Homes

The main advantage of trading using opposite NCR Corp and LGI Homes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NCR Corp 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 NCR Corp Pref 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.