Correlation Between Target and Lowes Companies
Can any of the company-specific risk be diversified away by investing in both Target and Lowes Companies 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 Target and Lowes Companies into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Target and Lowes Companies, you can compare the effects of market volatilities on Target and Lowes Companies 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 Target with a short position of Lowes Companies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Target and Lowes Companies.
Diversification Opportunities for Target and Lowes Companies
-0.02 | Correlation Coefficient |
Good diversification
The 3 months correlation between Target and Lowes is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Target and Lowes Companies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lowes Companies and Target 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 Target are associated (or correlated) with Lowes Companies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lowes Companies has no effect on the direction of Target i.e., Target and Lowes Companies go up and down completely randomly.
Pair Corralation between Target and Lowes Companies
Considering the 90-day investment horizon Target is expected to under-perform the Lowes Companies. In addition to that, Target is 2.88 times more volatile than Lowes Companies. It trades about -0.09 of its total potential returns per unit of risk. Lowes Companies is currently generating about 0.12 per unit of volatility. If you would invest 26,139 in Lowes Companies on August 31, 2024 and sell it today you would earn a total of 1,180 from holding Lowes Companies or generate 4.51% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Target vs. Lowes Companies
Performance |
| Timeline |
| Target |
| Lowes Companies |
Target and Lowes Companies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Target and Lowes Companies
The main advantage of trading using opposite Target and Lowes Companies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Target position performs unexpectedly, Lowes Companies 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 Lowes Companies will offset losses from the drop in Lowes Companies' long position.| Target vs. Dollar General | Target vs. Aquagold International | Target vs. Thrivent High Yield | Target vs. Morningstar Unconstrained Allocation |
| Lowes Companies vs. RLJ Lodging Trust | Lowes Companies vs. Aquagold International | Lowes Companies vs. Stepstone Group | Lowes Companies vs. Morningstar Unconstrained Allocation |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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