Correlation Between Tile Shop and Lowes Companies
Can any of the company-specific risk be diversified away by investing in both Tile Shop 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 Tile Shop and Lowes Companies into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Tile Shop Holdings and Lowes Companies, you can compare the effects of market volatilities on Tile Shop 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 Tile Shop with a short position of Lowes Companies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tile Shop and Lowes Companies.
Diversification Opportunities for Tile Shop and Lowes Companies
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Tile and Lowes is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Tile Shop Holdings and Lowes Companies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lowes Companies and Tile Shop 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 Tile Shop Holdings 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 Tile Shop i.e., Tile Shop and Lowes Companies go up and down completely randomly.
Pair Corralation between Tile Shop and Lowes Companies
Given the investment horizon of 90 days Tile Shop Holdings is expected to generate 1.6 times more return on investment than Lowes Companies. However, Tile Shop is 1.6 times more volatile than Lowes Companies. It trades about 0.05 of its potential returns per unit of risk. Lowes Companies is currently generating about 0.07 per unit of risk. If you would invest 451.00 in Tile Shop Holdings on August 29, 2024 and sell it today you would earn a total of 200.00 from holding Tile Shop Holdings or generate 44.35% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Tile Shop Holdings vs. Lowes Companies
Performance |
| Timeline |
| Tile Shop Holdings |
| Lowes Companies |
Tile Shop and Lowes Companies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tile Shop and Lowes Companies
The main advantage of trading using opposite Tile Shop and Lowes Companies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tile Shop 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.| Tile Shop vs. Kingfisher PLC ADR | Tile Shop vs. Haverty Furniture Companies | Tile Shop vs. Arhaus Inc | Tile Shop vs. Kirklands |
| Lowes Companies vs. Floor Decor Holdings | Lowes Companies vs. Arhaus Inc | Lowes Companies vs. Haverty Furniture Companies | Lowes Companies vs. Home Depot |
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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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