Correlation Between PICKN PAY and LGI Homes

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

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

Diversification Opportunities for PICKN PAY and LGI Homes

-0.15

Correlation Coefficient

PICKN PAY  LGI Homes

Good diversification

The 3 months correlation between PICKN and LGI is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding PICKN PAY STORES and LGI Homes in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LGI Homes and PICKN PAY 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 PICKN PAY STORES 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 PICKN PAY i.e., PICKN PAY and LGI Homes go up and down completely randomly.

Pair Corralation between PICKN PAY and LGI Homes

Assuming the 90 days trading horizon PICKN PAY STORES is expected to under-perform the LGI Homes. In addition to that, PICKN PAY is 1.18 times more volatile than LGI Homes. It trades about -0.03 of its total potential returns per unit of risk. LGI Homes is currently generating about 0.01 per unit of volatility. If you would invest  9,490  in LGI Homes on September 29, 2024 and sell it today you would lose (790.00) from holding LGI Homes or give up 8.32% of portfolio value over 90 days.

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

PICKN PAY STORES  vs.  LGI Homes

PICKN PAY STORES

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in PICKN PAY STORES are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, PICKN PAY 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. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with PICKN PAY and LGI Homes

The main advantage of trading using opposite PICKN PAY and LGI Homes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PICKN PAY 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 PICKN PAY STORES 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.