Correlation Between Lennox International and Louisiana Pacific
Can any of the company-specific risk be diversified away by investing in both Lennox International and Louisiana Pacific 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 Lennox International and Louisiana Pacific into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lennox International and Louisiana Pacific, you can compare the effects of market volatilities on Lennox International and Louisiana Pacific 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 Lennox International with a short position of Louisiana Pacific. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lennox International and Louisiana Pacific.
Diversification Opportunities for Lennox International and Louisiana Pacific
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Lennox and Louisiana is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Lennox International and Louisiana Pacific in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Louisiana Pacific and Lennox International 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 Lennox International are associated (or correlated) with Louisiana Pacific. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Louisiana Pacific has no effect on the direction of Lennox International i.e., Lennox International and Louisiana Pacific go up and down completely randomly.
Pair Corralation between Lennox International and Louisiana Pacific
Considering the 90-day investment horizon Lennox International is expected to generate 0.99 times more return on investment than Louisiana Pacific. However, Lennox International is 1.01 times less risky than Louisiana Pacific. It trades about 0.12 of its potential returns per unit of risk. Louisiana Pacific is currently generating about 0.12 per unit of risk. If you would invest 50,091 in Lennox International on August 24, 2024 and sell it today you would earn a total of 14,969 from holding Lennox International or generate 29.88% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lennox International vs. Louisiana Pacific
Performance |
| Timeline |
| Lennox International |
| Louisiana Pacific |
Lennox International and Louisiana Pacific Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lennox International and Louisiana Pacific
The main advantage of trading using opposite Lennox International and Louisiana Pacific positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lennox International position performs unexpectedly, Louisiana Pacific 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 Louisiana Pacific will offset losses from the drop in Louisiana Pacific's long position.| Lennox International vs. Carrier Global Corp | Lennox International vs. Johnson Controls International | Lennox International vs. Masco | Lennox International vs. Carlisle Companies Incorporated |
| Louisiana Pacific vs. Lennox International | Louisiana Pacific vs. Fortune Brands Innovations | Louisiana Pacific vs. Trane Technologies plc | Louisiana Pacific vs. Johnson Controls International |
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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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