Correlation Between Lear and 4 Less
Can any of the company-specific risk be diversified away by investing in both Lear and 4 Less 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 Lear and 4 Less into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lear Corporation and 4 Less Group, you can compare the effects of market volatilities on Lear and 4 Less 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 Lear with a short position of 4 Less. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lear and 4 Less.
Diversification Opportunities for Lear and 4 Less
Poor diversification
The 3 months correlation between Lear and FLES is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Lear Corp. and 4 Less Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 4 Less Group and Lear 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 Lear Corporation are associated (or correlated) with 4 Less. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 4 Less Group has no effect on the direction of Lear i.e., Lear and 4 Less go up and down completely randomly.
Pair Corralation between Lear and 4 Less
Considering the 90-day investment horizon Lear Corporation is expected to under-perform the 4 Less. But the stock apears to be less risky and, when comparing its historical volatility, Lear Corporation is 8.87 times less risky than 4 Less. The stock trades about -0.13 of its potential returns per unit of risk. The 4 Less Group is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest 0.05 in 4 Less Group on August 29, 2024 and sell it today you would lose (0.03) from holding 4 Less Group or give up 60.0% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 98.44% |
| Values | Daily Returns |
Lear Corp. vs. 4 Less Group
Performance |
| Timeline |
| Lear |
| 4 Less Group |
Lear and 4 Less Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lear and 4 Less
The main advantage of trading using opposite Lear and 4 Less positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lear position performs unexpectedly, 4 Less 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 4 Less will offset losses from the drop in 4 Less' long position.The idea behind Lear Corporation and 4 Less Group 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.| 4 Less vs. Triad Pro Innovators | 4 Less vs. ABCO Energy | 4 Less vs. Holiday Island Holdings | 4 Less vs. RCABS Inc |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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