Correlation Between Flexsteel Industries and Lear
Can any of the company-specific risk be diversified away by investing in both Flexsteel Industries and Lear 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 Flexsteel Industries and Lear into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Flexsteel Industries and Lear Corporation, you can compare the effects of market volatilities on Flexsteel Industries and Lear 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 Flexsteel Industries with a short position of Lear. Check out your portfolio center. Please also check ongoing floating volatility patterns of Flexsteel Industries and Lear.
Diversification Opportunities for Flexsteel Industries and Lear
-0.85 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Flexsteel and Lear is -0.85. Overlapping area represents the amount of risk that can be diversified away by holding Flexsteel Industries and Lear Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lear and Flexsteel 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 Flexsteel Industries are associated (or correlated) with Lear. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lear has no effect on the direction of Flexsteel Industries i.e., Flexsteel Industries and Lear go up and down completely randomly.
Pair Corralation between Flexsteel Industries and Lear
Given the investment horizon of 90 days Flexsteel Industries is expected to generate 1.29 times more return on investment than Lear. However, Flexsteel Industries is 1.29 times more volatile than Lear Corporation. It trades about 0.01 of its potential returns per unit of risk. Lear Corporation is currently generating about -0.05 per unit of risk. If you would invest 5,925 in Flexsteel Industries on August 30, 2024 and sell it today you would lose (8.00) from holding Flexsteel Industries or give up 0.14% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Flexsteel Industries vs. Lear Corp.
Performance |
| Timeline |
| Flexsteel Industries |
| Lear |
Flexsteel Industries and Lear Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Flexsteel Industries and Lear
The main advantage of trading using opposite Flexsteel Industries and Lear positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Flexsteel Industries position performs unexpectedly, Lear 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 Lear will offset losses from the drop in Lear's long position.| Flexsteel Industries vs. Hooker Furniture | Flexsteel Industries vs. Bassett Furniture Industries | Flexsteel Industries vs. Willis Lease Finance | Flexsteel Industries vs. Rocky Brands |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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