Correlation Between LGI Homes and Kandi Technologies
Can any of the company-specific risk be diversified away by investing in both LGI Homes and Kandi Technologies 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 LGI Homes and Kandi Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LGI Homes and Kandi Technologies Group, you can compare the effects of market volatilities on LGI Homes and Kandi Technologies 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 LGI Homes with a short position of Kandi Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of LGI Homes and Kandi Technologies.
Diversification Opportunities for LGI Homes and Kandi Technologies
0.55 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between LGI and Kandi is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding LGI Homes and Kandi Technologies Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kandi Technologies and LGI Homes 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 LGI Homes are associated (or correlated) with Kandi Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kandi Technologies has no effect on the direction of LGI Homes i.e., LGI Homes and Kandi Technologies go up and down completely randomly.
Pair Corralation between LGI Homes and Kandi Technologies
Given the investment horizon of 90 days LGI Homes is expected to under-perform the Kandi Technologies. But the stock apears to be less risky and, when comparing its historical volatility, LGI Homes is 1.26 times less risky than Kandi Technologies. The stock trades about -0.27 of its potential returns per unit of risk. The Kandi Technologies Group is currently generating about 0.33 of returns per unit of risk over similar time horizon. If you would invest 208.00 in Kandi Technologies Group on January 26, 2024 and sell it today you would earn a total of 53.00 from holding Kandi Technologies Group or generate 25.48% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
LGI Homes vs. Kandi Technologies Group
Performance |
| Timeline |
| LGI Homes |
| Kandi Technologies |
LGI Homes and Kandi Technologies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LGI Homes and Kandi Technologies
The main advantage of trading using opposite LGI Homes and Kandi Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LGI Homes position performs unexpectedly, Kandi Technologies 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 Kandi Technologies will offset losses from the drop in Kandi Technologies' long position.| LGI Homes vs. Api GroupCorp | LGI Homes vs. MYR Group | LGI Homes vs. Comfort Systems USA | LGI Homes vs. Construction Partners |
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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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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