Correlation Between Sleep Number and Lifetime Brands
Can any of the company-specific risk be diversified away by investing in both Sleep Number and Lifetime Brands 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 Sleep Number and Lifetime Brands into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sleep Number Corp and Lifetime Brands, you can compare the effects of market volatilities on Sleep Number and Lifetime Brands 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 Sleep Number with a short position of Lifetime Brands. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sleep Number and Lifetime Brands.
Diversification Opportunities for Sleep Number and Lifetime Brands
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Sleep and Lifetime is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Sleep Number Corp and Lifetime Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lifetime Brands and Sleep Number 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 Sleep Number Corp are associated (or correlated) with Lifetime Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lifetime Brands has no effect on the direction of Sleep Number i.e., Sleep Number and Lifetime Brands go up and down completely randomly.
Pair Corralation between Sleep Number and Lifetime Brands
Given the investment horizon of 90 days Sleep Number Corp is expected to generate 1.05 times more return on investment than Lifetime Brands. However, Sleep Number is 1.05 times more volatile than Lifetime Brands. It trades about 0.11 of its potential returns per unit of risk. Lifetime Brands is currently generating about 0.06 per unit of risk. If you would invest 1,567 in Sleep Number Corp on November 2, 2024 and sell it today you would earn a total of 221.00 from holding Sleep Number Corp or generate 14.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sleep Number Corp vs. Lifetime Brands
Performance |
| Timeline |
| Sleep Number Corp |
| Lifetime Brands |
Sleep Number and Lifetime Brands Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sleep Number and Lifetime Brands
The main advantage of trading using opposite Sleep Number and Lifetime Brands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sleep Number position performs unexpectedly, Lifetime Brands 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 Lifetime Brands will offset losses from the drop in Lifetime Brands' long position.| Sleep Number vs. Purple Innovation | Sleep Number vs. Mohawk Industries | Sleep Number vs. La Z Boy Incorporated | Sleep Number vs. Leggett Platt Incorporated |
| Lifetime Brands vs. Bassett Furniture Industries | Lifetime Brands vs. Flexsteel Industries | Lifetime Brands vs. Hamilton Beach Brands | Lifetime Brands vs. Natuzzi SpA |
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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