Correlation Between La Z and American Woodmark
Can any of the company-specific risk be diversified away by investing in both La Z and American Woodmark 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 La Z and American Woodmark into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between La Z Boy Incorporated and American Woodmark, you can compare the effects of market volatilities on La Z and American Woodmark 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 La Z with a short position of American Woodmark. Check out your portfolio center. Please also check ongoing floating volatility patterns of La Z and American Woodmark.
Diversification Opportunities for La Z and American Woodmark
0.29 | Correlation Coefficient |
Modest diversification
The 3 months correlation between LZB and American is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding La Z Boy Incorporated and American Woodmark in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Woodmark and La Z 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 La Z Boy Incorporated are associated (or correlated) with American Woodmark. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Woodmark has no effect on the direction of La Z i.e., La Z and American Woodmark go up and down completely randomly.
Pair Corralation between La Z and American Woodmark
Considering the 90-day investment horizon La Z Boy Incorporated is expected to generate 0.7 times more return on investment than American Woodmark. However, La Z Boy Incorporated is 1.43 times less risky than American Woodmark. It trades about 0.31 of its potential returns per unit of risk. American Woodmark is currently generating about 0.08 per unit of risk. If you would invest 3,933 in La Z Boy Incorporated on August 24, 2024 and sell it today you would earn a total of 436.00 from holding La Z Boy Incorporated or generate 11.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
La Z Boy Incorporated vs. American Woodmark
Performance |
| Timeline |
| La Z Boy |
| American Woodmark |
La Z and American Woodmark Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with La Z and American Woodmark
The main advantage of trading using opposite La Z and American Woodmark positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if La Z position performs unexpectedly, American Woodmark 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 American Woodmark will offset losses from the drop in American Woodmark's long position.| La Z vs. Flexsteel Industries | La Z vs. Crown Crafts | La Z vs. Bassett Furniture Industries | La Z vs. Hamilton Beach Brands |
| American Woodmark vs. La Z Boy Incorporated | American Woodmark vs. Natuzzi SpA | American Woodmark vs. Mohawk Industries | American Woodmark vs. MasterBrand |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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