Correlation Between Lowes Companies and LL Flooring
Can any of the company-specific risk be diversified away by investing in both Lowes Companies and LL Flooring 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 Lowes Companies and LL Flooring into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lowes Companies and LL Flooring Holdings, you can compare the effects of market volatilities on Lowes Companies and LL Flooring 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 Lowes Companies with a short position of LL Flooring. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lowes Companies and LL Flooring.
Diversification Opportunities for Lowes Companies and LL Flooring
-0.78 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Lowes and LL Flooring is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding Lowes Companies and LL Flooring Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LL Flooring Holdings and Lowes Companies 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 Lowes Companies are associated (or correlated) with LL Flooring. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LL Flooring Holdings has no effect on the direction of Lowes Companies i.e., Lowes Companies and LL Flooring go up and down completely randomly.
Pair Corralation between Lowes Companies and LL Flooring
Considering the 90-day investment horizon Lowes Companies is expected to generate 0.59 times more return on investment than LL Flooring. However, Lowes Companies is 1.69 times less risky than LL Flooring. It trades about -0.2 of its potential returns per unit of risk. LL Flooring Holdings is currently generating about -0.13 per unit of risk. If you would invest 24,802 in Lowes Companies on January 19, 2024 and sell it today you would lose (1,661) from holding Lowes Companies or give up 6.7% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lowes Companies vs. LL Flooring Holdings
Performance |
| Timeline |
| Lowes Companies |
| LL Flooring Holdings |
Lowes Companies and LL Flooring Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lowes Companies and LL Flooring
The main advantage of trading using opposite Lowes Companies and LL Flooring positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lowes Companies position performs unexpectedly, LL Flooring 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 LL Flooring will offset losses from the drop in LL Flooring's long position.| Lowes Companies vs. Floor Decor Holdings | Lowes Companies vs. LL Flooring Holdings | Lowes Companies vs. Arhaus Inc | Lowes Companies vs. Haverty Furniture Companies |
| LL Flooring vs. Haverty Furniture Companies | LL Flooring vs. Arhaus Inc | LL Flooring vs. Tile Shop Holdings | LL Flooring vs. Floor Decor Holdings |
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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