Correlation Between Adaptive Medias and LGI Homes

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Can any of the company-specific risk be diversified away by investing in both Adaptive Medias 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 Adaptive Medias and LGI Homes into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Adaptive Medias and LGI Homes, you can compare the effects of market volatilities on Adaptive Medias 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 Adaptive Medias with a short position of LGI Homes. Check out your portfolio center. Please also check ongoing floating volatility patterns of Adaptive Medias and LGI Homes.

Diversification Opportunities for Adaptive Medias and LGI Homes

0.09
  Correlation Coefficient

Significant diversification

The 3 months correlation between Adaptive and LGI is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Adaptive Medias and LGI Homes in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LGI Homes and Adaptive Medias 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 Adaptive Medias 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 Adaptive Medias i.e., Adaptive Medias and LGI Homes go up and down completely randomly.

Pair Corralation between Adaptive Medias and LGI Homes

If you would invest  0.01  in Adaptive Medias on December 5, 2023 and sell it today you would earn a total of  0.00  from holding Adaptive Medias or generate 0.0% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy4.76%
ValuesDaily Returns

Adaptive Medias  vs.  LGI Homes

 Performance 
       Timeline  
Adaptive Medias 

Risk-Adjusted Performance

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Very Weak
Over the last 90 days Adaptive Medias has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Adaptive Medias is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.
LGI Homes 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days LGI Homes has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong forward indicators, LGI Homes is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Adaptive Medias and LGI Homes Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Adaptive Medias and LGI Homes

The main advantage of trading using opposite Adaptive Medias and LGI Homes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Adaptive Medias 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 Adaptive Medias 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.

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