Correlation Between La Z and MasterBrand
Can any of the company-specific risk be diversified away by investing in both La Z and MasterBrand 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 MasterBrand 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 MasterBrand, you can compare the effects of market volatilities on La Z and MasterBrand 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 MasterBrand. Check out your portfolio center. Please also check ongoing floating volatility patterns of La Z and MasterBrand.
Diversification Opportunities for La Z and MasterBrand
0.09 | Correlation Coefficient |
Significant diversification
The 3 months correlation between LZB and MasterBrand is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding La Z Boy Incorporated and MasterBrand in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MasterBrand 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 MasterBrand. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MasterBrand has no effect on the direction of La Z i.e., La Z and MasterBrand go up and down completely randomly.
Pair Corralation between La Z and MasterBrand
Considering the 90-day investment horizon La Z Boy Incorporated is expected to generate 0.72 times more return on investment than MasterBrand. However, La Z Boy Incorporated is 1.39 times less risky than MasterBrand. It trades about 0.31 of its potential returns per unit of risk. MasterBrand is currently generating about -0.12 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 | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
La Z Boy Incorporated vs. MasterBrand
Performance |
| Timeline |
| La Z Boy |
| MasterBrand |
La Z and MasterBrand Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with La Z and MasterBrand
The main advantage of trading using opposite La Z and MasterBrand positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if La Z position performs unexpectedly, MasterBrand 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 MasterBrand will offset losses from the drop in MasterBrand'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 |
| MasterBrand vs. Bassett Furniture Industries | MasterBrand vs. Ethan Allen Interiors | MasterBrand vs. Natuzzi SpA | MasterBrand vs. Flexsteel Industries |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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