Correlation Between Cavco Industries and LGI Homes

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

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

Diversification Opportunities for Cavco Industries and LGI Homes

0.51

Correlation Coefficient

Cavco Industries  LGI Homes

Very weak diversification

The 3 months correlation between Cavco and LGI is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Cavco Industries and LGI Homes in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LGI Homes and Cavco Industries 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 Cavco Industries 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 Cavco Industries i.e., Cavco Industries and LGI Homes go up and down completely randomly.

Pair Corralation between Cavco Industries and LGI Homes

Given the investment horizon of 90 days Cavco Industries is expected to under-perform the LGI Homes. But the stock apears to be less risky and, when comparing its historical volatility, Cavco Industries is 1.68 times less risky than LGI Homes. The stock trades about -0.11 of its potential returns per unit of risk. The LGI Homes is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  5,411  in LGI Homes on May 7, 2025 and sell it today you would earn a total of  53.00  from holding LGI Homes or generate 0.98% return on investment over 90 days.

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

Cavco Industries  vs.  LGI Homes

Cavco Industries

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cavco Industries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's fundamental indicators remain very healthy which may send shares a bit higher in September 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

LGI Homes

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in LGI Homes are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong forward indicators, LGI Homes is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Cavco Industries and LGI Homes

The main advantage of trading using opposite Cavco Industries and LGI Homes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cavco Industries 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 Cavco Industries 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.