Correlation Between Flexsteel Industries and Lovesac
Can any of the company-specific risk be diversified away by investing in both Flexsteel Industries and Lovesac 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 Lovesac into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Flexsteel Industries and The Lovesac, you can compare the effects of market volatilities on Flexsteel Industries and Lovesac 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 Lovesac. Check out your portfolio center. Please also check ongoing floating volatility patterns of Flexsteel Industries and Lovesac.
Diversification Opportunities for Flexsteel Industries and Lovesac
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Flexsteel and Lovesac is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Flexsteel Industries and The Lovesac in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lovesac 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 Lovesac. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lovesac has no effect on the direction of Flexsteel Industries i.e., Flexsteel Industries and Lovesac go up and down completely randomly.
Pair Corralation between Flexsteel Industries and Lovesac
Given the investment horizon of 90 days Flexsteel Industries is expected to under-perform the Lovesac. In addition to that, Flexsteel Industries is 1.4 times more volatile than The Lovesac. It trades about -0.06 of its total potential returns per unit of risk. The Lovesac is currently generating about 0.23 per unit of volatility. If you would invest 2,392 in The Lovesac on November 2, 2024 and sell it today you would earn a total of 176.00 from holding The Lovesac or generate 7.36% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Flexsteel Industries vs. The Lovesac
Performance |
| Timeline |
| Flexsteel Industries |
| Lovesac |
Flexsteel Industries and Lovesac Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Flexsteel Industries and Lovesac
The main advantage of trading using opposite Flexsteel Industries and Lovesac positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Flexsteel Industries position performs unexpectedly, Lovesac 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 Lovesac will offset losses from the drop in Lovesac'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 |
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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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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