Correlation Between Xponential Fitness and LGI Homes

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

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

Diversification Opportunities for Xponential Fitness and LGI Homes

-0.38

Correlation Coefficient

Xponential Fitness  LGI Homes

Very good diversification

The 3 months correlation between Xponential and LGI is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Xponential Fitness and LGI Homes in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LGI Homes and Xponential Fitness 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 Xponential Fitness 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 Xponential Fitness i.e., Xponential Fitness and LGI Homes go up and down completely randomly.

Pair Corralation between Xponential Fitness and LGI Homes

Given the investment horizon of 90 days Xponential Fitness is expected to generate 2.04 times more return on investment than LGI Homes. However, Xponential Fitness is 2.04 times more volatile than LGI Homes. It trades about 0.03 of its potential returns per unit of risk. LGI Homes is currently generating about -0.07 per unit of risk. If you would invest  1,364  in Xponential Fitness on September 13, 2024 and sell it today you would earn a total of  41.00  from holding Xponential Fitness or generate 3.01% return on investment over 90 days.

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

Xponential Fitness  vs.  LGI Homes

Xponential Fitness

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Xponential Fitness are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating basic indicators, Xponential Fitness may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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 latest uncertain performance, the Stock's forward indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Pair Trading with Xponential Fitness and LGI Homes

The main advantage of trading using opposite Xponential Fitness and LGI Homes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Xponential Fitness 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 Xponential Fitness 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..