Correlation Between Dogness International and LGI Homes

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

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

Diversification Opportunities for Dogness International and LGI Homes

-0.53

Correlation Coefficient

Dogness International  LGI Homes

Excellent diversification

The 3 months correlation between Dogness and LGI is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Dogness International Corp and LGI Homes in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LGI Homes and Dogness International 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 Dogness International Corp 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 Dogness International i.e., Dogness International and LGI Homes go up and down completely randomly.

Pair Corralation between Dogness International and LGI Homes

Given the investment horizon of 90 days Dogness International Corp is expected to under-perform the LGI Homes. In addition to that, Dogness International is 3.4 times more volatile than LGI Homes. It trades about -0.24 of its total potential returns per unit of risk. LGI Homes is currently generating about -0.06 per unit of volatility. If you would invest  10,060  in LGI Homes on February 7, 2024 and sell it today you would lose (387.00) from holding LGI Homes or give up 3.85% of portfolio value over 90 days.

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

Dogness International Corp  vs.  LGI Homes

Dogness International

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Dogness International Corp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile technical and fundamental indicators, Dogness International showed solid returns over the last few months and may actually be approaching a breakup point.

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 fragile performance in the last few months, the Stock's forward indicators remain fairly strong which may send shares a bit higher in June 2024. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Dogness International and LGI Homes

The main advantage of trading using opposite Dogness International and LGI Homes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dogness International 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 Dogness International Corp 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.