Correlation Between Juniata Valley and LGI Homes

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

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

Diversification Opportunities for Juniata Valley and LGI Homes

0.33

Correlation Coefficient

Juniata Valley  LGI Homes

Weak diversification

The 3 months correlation between Juniata and LGI is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Juniata Valley Financial and LGI Homes in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LGI Homes and Juniata Valley 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 Juniata Valley Financial 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 Juniata Valley i.e., Juniata Valley and LGI Homes go up and down completely randomly.

Pair Corralation between Juniata Valley and LGI Homes

Given the investment horizon of 90 days Juniata Valley Financial is expected to generate 0.78 times more return on investment than LGI Homes. However, Juniata Valley Financial is 1.28 times less risky than LGI Homes. It trades about -0.18 of its potential returns per unit of risk. LGI Homes is currently generating about -0.17 per unit of risk. If you would invest  1,345  in Juniata Valley Financial on January 30, 2024 and sell it today you would lose (185.00) from holding Juniata Valley Financial or give up 13.75% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Juniata Valley Financial  vs.  LGI Homes

Juniata Valley Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Juniata Valley Financial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Juniata Valley is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

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 May 2024. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Juniata Valley and LGI Homes

The main advantage of trading using opposite Juniata Valley and LGI Homes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Juniata Valley 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 Juniata Valley Financial 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..