Correlation Between Louisiana Pacific and Masco
Can any of the company-specific risk be diversified away by investing in both Louisiana Pacific and Masco 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 Louisiana Pacific and Masco into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Louisiana Pacific and Masco, you can compare the effects of market volatilities on Louisiana Pacific and Masco 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 Louisiana Pacific with a short position of Masco. Check out your portfolio center. Please also check ongoing floating volatility patterns of Louisiana Pacific and Masco.
Diversification Opportunities for Louisiana Pacific and Masco
0.2 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Louisiana and Masco is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Louisiana Pacific and Masco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Masco and Louisiana Pacific 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 Louisiana Pacific are associated (or correlated) with Masco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Masco has no effect on the direction of Louisiana Pacific i.e., Louisiana Pacific and Masco go up and down completely randomly.
Pair Corralation between Louisiana Pacific and Masco
Considering the 90-day investment horizon Louisiana Pacific is expected to generate 1.53 times more return on investment than Masco. However, Louisiana Pacific is 1.53 times more volatile than Masco. It trades about 0.37 of its potential returns per unit of risk. Masco is currently generating about 0.02 per unit of risk. If you would invest 9,843 in Louisiana Pacific on August 31, 2024 and sell it today you would earn a total of 1,821 from holding Louisiana Pacific or generate 18.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Louisiana Pacific vs. Masco
Performance |
| Timeline |
| Louisiana Pacific |
| Masco |
Louisiana Pacific and Masco Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Louisiana Pacific and Masco
The main advantage of trading using opposite Louisiana Pacific and Masco positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Louisiana Pacific position performs unexpectedly, Masco 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 Masco will offset losses from the drop in Masco's long position.| Louisiana Pacific vs. Lennox International | Louisiana Pacific vs. Fortune Brands Innovations | Louisiana Pacific vs. Trane Technologies plc | Louisiana Pacific vs. Johnson Controls International |
| Masco vs. Trane Technologies plc | Masco vs. Quanex Building Products | Masco vs. Jeld Wen Holding | Masco vs. Azek Company |
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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