Correlation Between Lowes Companies and Tile Shop
Can any of the company-specific risk be diversified away by investing in both Lowes Companies and Tile Shop 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 Lowes Companies and Tile Shop into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lowes Companies and Tile Shop Holdings, you can compare the effects of market volatilities on Lowes Companies and Tile Shop 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 Lowes Companies with a short position of Tile Shop. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lowes Companies and Tile Shop.
Diversification Opportunities for Lowes Companies and Tile Shop
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Lowes and Tile is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Lowes Companies and Tile Shop Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tile Shop Holdings and Lowes Companies 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 Lowes Companies are associated (or correlated) with Tile Shop. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tile Shop Holdings has no effect on the direction of Lowes Companies i.e., Lowes Companies and Tile Shop go up and down completely randomly.
Pair Corralation between Lowes Companies and Tile Shop
Considering the 90-day investment horizon Lowes Companies is expected to under-perform the Tile Shop. But the stock apears to be less risky and, when comparing its historical volatility, Lowes Companies is 1.35 times less risky than Tile Shop. The stock trades about -0.06 of its potential returns per unit of risk. The Tile Shop Holdings is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 658.00 in Tile Shop Holdings on August 25, 2024 and sell it today you would earn a total of 3.00 from holding Tile Shop Holdings or generate 0.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lowes Companies vs. Tile Shop Holdings
Performance |
| Timeline |
| Lowes Companies |
| Tile Shop Holdings |
Lowes Companies and Tile Shop Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lowes Companies and Tile Shop
The main advantage of trading using opposite Lowes Companies and Tile Shop positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lowes Companies position performs unexpectedly, Tile Shop 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 Tile Shop will offset losses from the drop in Tile Shop's long position.| Lowes Companies vs. Floor Decor Holdings | Lowes Companies vs. Arhaus Inc | Lowes Companies vs. Haverty Furniture Companies | Lowes Companies vs. Home Depot |
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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
Other Complementary Tools
| Economic Indicators Top statistical indicators that provide insights into how an economy is performing | |
| ETF Categories List of ETF categories grouped based on various criteria, such as the investment strategy or type of investments | |
| Commodity Channel Use Commodity Channel Index to analyze current equity momentum | |
| Global Correlations Find global opportunities by holding instruments from different markets | |
| Bollinger Bands Use Bollinger Bands indicator to analyze target price for a given investing horizon |