Correlation Between LGI Homes and 24SevenOffice Group

Can any of the company-specific risk be diversified away by investing in both LGI Homes and 24SevenOffice Group 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 24SevenOffice Group into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between LGI Homes and 24SevenOffice Group AB, you can compare the effects of market volatilities on LGI Homes and 24SevenOffice Group 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 24SevenOffice Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of LGI Homes and 24SevenOffice Group.

Diversification Opportunities for LGI Homes and 24SevenOffice Group

-0.22

Correlation Coefficient

LGI Homes  24SevenOffice Group

Very good diversification

The 3 months correlation between LGI and 24SevenOffice is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding LGI Homes and 24SevenOffice Group AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 24SevenOffice Group 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 24SevenOffice Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 24SevenOffice Group has no effect on the direction of LGI Homes i.e., LGI Homes and 24SevenOffice Group go up and down completely randomly.

Pair Corralation between LGI Homes and 24SevenOffice Group

Given the investment horizon of 90 days LGI Homes is expected to generate 4.46 times less return on investment than 24SevenOffice Group. But when comparing it to its historical volatility, LGI Homes is 1.72 times less risky than 24SevenOffice Group. It trades about 0.02 of its potential returns per unit of risk. 24SevenOffice Group AB is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  130.00  in 24SevenOffice Group AB on February 21, 2024 and sell it today you would earn a total of  47.00  from holding 24SevenOffice Group AB or generate 36.15% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	68.89%
Values	Daily Returns

LGI Homes  vs.  24SevenOffice Group AB

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 latest weak performance, the Stock's forward indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

24SevenOffice Group

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in 24SevenOffice Group AB are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly conflicting basic indicators, 24SevenOffice Group reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with LGI Homes and 24SevenOffice Group

The main advantage of trading using opposite LGI Homes and 24SevenOffice Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LGI Homes position performs unexpectedly, 24SevenOffice Group 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 24SevenOffice Group will offset losses from the drop in 24SevenOffice Group's long position.

The idea behind LGI Homes and 24SevenOffice Group AB 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.