Correlation Between Lowes Companies and Daily Journal
Can any of the company-specific risk be diversified away by investing in both Lowes Companies and Daily Journal 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 Lowes Companies and Daily Journal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lowes Companies and Daily Journal Corp, you can compare the effects of market volatilities on Lowes Companies and Daily Journal 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 Lowes Companies with a short position of Daily Journal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lowes Companies and Daily Journal.
Diversification Opportunities for Lowes Companies and Daily Journal
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Lowes and Daily is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Lowes Companies and Daily Journal Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daily Journal Corp and Lowes Companies 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 Lowes Companies are associated (or correlated) with Daily Journal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Daily Journal Corp has no effect on the direction of Lowes Companies i.e., Lowes Companies and Daily Journal go up and down completely randomly.
Pair Corralation between Lowes Companies and Daily Journal
Considering the 90-day investment horizon Lowes Companies is expected to under-perform the Daily Journal. But the stock apears to be less risky and, when comparing its historical volatility, Lowes Companies is 1.72 times less risky than Daily Journal. The stock trades about -0.28 of its potential returns per unit of risk. The Daily Journal Corp is currently generating about -0.13 of returns per unit of risk over similar time horizon. If you would invest 36,888 in Daily Journal Corp on January 20, 2024 and sell it today you would lose (2,688) from holding Daily Journal Corp or give up 7.29% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lowes Companies vs. Daily Journal Corp
Performance |
| Timeline |
| Lowes Companies |
| Daily Journal Corp |
Lowes Companies and Daily Journal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lowes Companies and Daily Journal
The main advantage of trading using opposite Lowes Companies and Daily Journal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lowes Companies position performs unexpectedly, Daily Journal 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 Daily Journal will offset losses from the drop in Daily Journal's long position.| Lowes Companies vs. Arhaus Inc | Lowes Companies vs. Haverty Furniture Companies | Lowes Companies vs. Kirklands | Lowes Companies vs. Live Ventures |
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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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