Correlation Between Best Buy and Lowes Companies
Can any of the company-specific risk be diversified away by investing in both Best Buy and Lowes Companies 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 Best Buy and Lowes Companies into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Best Buy Co and Lowes Companies, you can compare the effects of market volatilities on Best Buy and Lowes Companies 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 Best Buy with a short position of Lowes Companies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Best Buy and Lowes Companies.
Diversification Opportunities for Best Buy and Lowes Companies
0.14 | Correlation Coefficient |
Average diversification
The 3 months correlation between Best and Lowes is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Best Buy Co and Lowes Companies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lowes Companies and Best Buy 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 Best Buy Co are associated (or correlated) with Lowes Companies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lowes Companies has no effect on the direction of Best Buy i.e., Best Buy and Lowes Companies go up and down completely randomly.
Pair Corralation between Best Buy and Lowes Companies
Considering the 90-day investment horizon Best Buy Co is expected to under-perform the Lowes Companies. In addition to that, Best Buy is 2.31 times more volatile than Lowes Companies. It trades about -0.09 of its total potential returns per unit of risk. Lowes Companies is currently generating about -0.16 per unit of volatility. If you would invest 25,723 in Lowes Companies on December 6, 2024 and sell it today you would lose (1,373) from holding Lowes Companies or give up 5.34% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Best Buy Co vs. Lowes Companies
Performance |
| Timeline |
| Best Buy |
| Lowes Companies |
Best Buy and Lowes Companies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Best Buy and Lowes Companies
The main advantage of trading using opposite Best Buy and Lowes Companies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Best Buy position performs unexpectedly, Lowes Companies 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 Lowes Companies will offset losses from the drop in Lowes Companies' long position.The idea behind Best Buy Co and Lowes Companies 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.| Lowes Companies vs. Floor Decor Holdings | Lowes Companies vs. Arhaus Inc | Lowes Companies vs. Haverty Furniture Companies | Lowes Companies vs. Home Depot |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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