Correlation Between HORNBACH Baumarkt and LCI Industries
Can any of the company-specific risk be diversified away by investing in both HORNBACH Baumarkt and LCI Industries 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 HORNBACH Baumarkt and LCI Industries into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between HORNBACH Baumarkt AG and LCI Industries, you can compare the effects of market volatilities on HORNBACH Baumarkt and LCI Industries 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 HORNBACH Baumarkt with a short position of LCI Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of HORNBACH Baumarkt and LCI Industries.
Diversification Opportunities for HORNBACH Baumarkt and LCI Industries
-0.37 | Correlation Coefficient |
Very good diversification
The 3 months correlation between HORNBACH and LCI is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding HORNBACH Baumarkt AG and LCI Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LCI Industries and HORNBACH Baumarkt 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 HORNBACH Baumarkt AG are associated (or correlated) with LCI Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LCI Industries has no effect on the direction of HORNBACH Baumarkt i.e., HORNBACH Baumarkt and LCI Industries go up and down completely randomly.
Pair Corralation between HORNBACH Baumarkt and LCI Industries
Assuming the 90 days trading horizon HORNBACH Baumarkt is expected to generate 1.46 times less return on investment than LCI Industries. But when comparing it to its historical volatility, HORNBACH Baumarkt AG is 2.24 times less risky than LCI Industries. It trades about 0.04 of its potential returns per unit of risk. LCI Industries is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 8,993 in LCI Industries on October 19, 2024 and sell it today you would earn a total of 1,407 from holding LCI Industries or generate 15.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
HORNBACH Baumarkt AG vs. LCI Industries
Performance |
| Timeline |
| HORNBACH Baumarkt |
| LCI Industries |
HORNBACH Baumarkt and LCI Industries Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with HORNBACH Baumarkt and LCI Industries
The main advantage of trading using opposite HORNBACH Baumarkt and LCI Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HORNBACH Baumarkt position performs unexpectedly, LCI Industries 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 LCI Industries will offset losses from the drop in LCI Industries' long position.| HORNBACH Baumarkt vs. The Home Depot | HORNBACH Baumarkt vs. Floor Decor Holdings | HORNBACH Baumarkt vs. LESLIES INC DL | HORNBACH Baumarkt vs. WICKES GROUP PLC |
| LCI Industries vs. SYSTEMAIR AB | LCI Industries vs. Delta Air Lines | LCI Industries vs. FAIR ISAAC | LCI Industries vs. Air New Zealand |
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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