Correlation Between La Z and Flexsteel Industries
Can any of the company-specific risk be diversified away by investing in both La Z and Flexsteel Industries 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 Flexsteel Industries 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 Flexsteel Industries, you can compare the effects of market volatilities on La Z and Flexsteel Industries 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 Flexsteel Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of La Z and Flexsteel Industries.
Diversification Opportunities for La Z and Flexsteel Industries
0.01 | Correlation Coefficient |
Significant diversification
The 3 months correlation between LZB and Flexsteel is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding La Z Boy Incorporated and Flexsteel Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Flexsteel Industries 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 Flexsteel Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Flexsteel Industries has no effect on the direction of La Z i.e., La Z and Flexsteel Industries go up and down completely randomly.
Pair Corralation between La Z and Flexsteel Industries
Considering the 90-day investment horizon La Z is expected to generate 3.56 times less return on investment than Flexsteel Industries. But when comparing it to its historical volatility, La Z Boy Incorporated is 1.85 times less risky than Flexsteel Industries. It trades about 0.07 of its potential returns per unit of risk. Flexsteel Industries is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 1,692 in Flexsteel Industries on August 24, 2024 and sell it today you would earn a total of 4,209 from holding Flexsteel Industries or generate 248.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
La Z Boy Incorporated vs. Flexsteel Industries
Performance |
| Timeline |
| La Z Boy |
| Flexsteel Industries |
La Z and Flexsteel Industries Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with La Z and Flexsteel Industries
The main advantage of trading using opposite La Z and Flexsteel Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if La Z position performs unexpectedly, Flexsteel Industries 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 Flexsteel Industries will offset losses from the drop in Flexsteel Industries' long position.| La Z vs. Flexsteel Industries | La Z vs. Crown Crafts | La Z vs. Bassett Furniture Industries | La Z vs. Hamilton Beach Brands |
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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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