Correlation Between Sothebys and LGI Homes

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

By analyzing existing cross correlation between Sothebys 7375 percent and LGI Homes, you can compare the effects of market volatilities on Sothebys 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 Sothebys with a short position of LGI Homes. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sothebys and LGI Homes.

Diversification Opportunities for Sothebys and LGI Homes

0.54

Correlation Coefficient

Sothebys  LGI Homes

Very weak diversification

The 3 months correlation between Sothebys and LGI is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Sothebys 7375 percent and LGI Homes in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LGI Homes and Sothebys 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 Sothebys 7375 percent 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 Sothebys i.e., Sothebys and LGI Homes go up and down completely randomly.

Pair Corralation between Sothebys and LGI Homes

Assuming the 90 days trading horizon Sothebys 7375 percent is expected to under-perform the LGI Homes. But the bond apears to be less risky and, when comparing its historical volatility, Sothebys 7375 percent is 2.48 times less risky than LGI Homes. The bond trades about -0.02 of its potential returns per unit of risk. The LGI Homes is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  10,723  in LGI Homes on October 4, 2024 and sell it today you would lose (2,024) from holding LGI Homes or give up 18.88% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	89.72%
Values	Daily Returns

Sothebys 7375 percent  vs.  LGI Homes

Sothebys 7375 percent

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sothebys 7375 percent has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for Sothebys 7375 percent 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 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 Sothebys and LGI Homes

The main advantage of trading using opposite Sothebys and LGI Homes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sothebys 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 Sothebys 7375 percent 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.

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 Money Managers module to screen money managers from public funds and ETFs managed around the world.