Correlation Between MasterBrand and Lovesac
Can any of the company-specific risk be diversified away by investing in both MasterBrand and Lovesac 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 MasterBrand and Lovesac into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MasterBrand and The Lovesac, you can compare the effects of market volatilities on MasterBrand and Lovesac 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 MasterBrand with a short position of Lovesac. Check out your portfolio center. Please also check ongoing floating volatility patterns of MasterBrand and Lovesac.
Diversification Opportunities for MasterBrand and Lovesac
0.47 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between MasterBrand and Lovesac is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding MasterBrand and The Lovesac in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lovesac and MasterBrand 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 MasterBrand are associated (or correlated) with Lovesac. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lovesac has no effect on the direction of MasterBrand i.e., MasterBrand and Lovesac go up and down completely randomly.
Pair Corralation between MasterBrand and Lovesac
Considering the 90-day investment horizon MasterBrand is expected to under-perform the Lovesac. But the stock apears to be less risky and, when comparing its historical volatility, MasterBrand is 1.56 times less risky than Lovesac. The stock trades about -0.06 of its potential returns per unit of risk. The The Lovesac is currently generating about 0.32 of returns per unit of risk over similar time horizon. If you would invest 3,079 in The Lovesac on August 28, 2024 and sell it today you would earn a total of 768.00 from holding The Lovesac or generate 24.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
MasterBrand vs. The Lovesac
Performance |
| Timeline |
| MasterBrand |
| Lovesac |
MasterBrand and Lovesac Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MasterBrand and Lovesac
The main advantage of trading using opposite MasterBrand and Lovesac positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MasterBrand position performs unexpectedly, Lovesac 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 Lovesac will offset losses from the drop in Lovesac's long position.| MasterBrand vs. Bassett Furniture Industries | MasterBrand vs. Ethan Allen Interiors | MasterBrand vs. Natuzzi SpA | MasterBrand vs. Flexsteel Industries |
| Lovesac vs. Tempur Sealy International | Lovesac vs. La Z Boy Incorporated | Lovesac vs. Purple Innovation | Lovesac 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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