Correlation Between Lovesac and Sleep Number
Can any of the company-specific risk be diversified away by investing in both Lovesac and Sleep Number 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 Lovesac and Sleep Number into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between The Lovesac and Sleep Number Corp, you can compare the effects of market volatilities on Lovesac and Sleep Number 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 Lovesac with a short position of Sleep Number. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lovesac and Sleep Number.
Diversification Opportunities for Lovesac and Sleep Number
-0.31 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Lovesac and Sleep is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding The Lovesac and Sleep Number Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sleep Number Corp and Lovesac 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 The Lovesac are associated (or correlated) with Sleep Number. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sleep Number Corp has no effect on the direction of Lovesac i.e., Lovesac and Sleep Number go up and down completely randomly.
Pair Corralation between Lovesac and Sleep Number
Given the investment horizon of 90 days The Lovesac is expected to generate 0.62 times more return on investment than Sleep Number. However, The Lovesac is 1.61 times less risky than Sleep Number. It trades about 0.05 of its potential returns per unit of risk. Sleep Number Corp is currently generating about 0.01 per unit of risk. If you would invest 2,286 in The Lovesac on August 27, 2024 and sell it today you would earn a total of 1,185 from holding The Lovesac or generate 51.84% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
The Lovesac vs. Sleep Number Corp
Performance |
| Timeline |
| Lovesac |
| Sleep Number Corp |
Lovesac and Sleep Number Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lovesac and Sleep Number
The main advantage of trading using opposite Lovesac and Sleep Number positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lovesac position performs unexpectedly, Sleep Number 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 Sleep Number will offset losses from the drop in Sleep Number's long position.| Lovesac vs. Tempur Sealy International | Lovesac vs. La Z Boy Incorporated | Lovesac vs. Purple Innovation | Lovesac vs. MasterBrand |
| Sleep Number vs. Purple Innovation | Sleep Number vs. Mohawk Industries | Sleep Number vs. La Z Boy Incorporated | Sleep Number vs. Leggett Platt Incorporated |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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