Correlation Between Middleby Corp and Lowes Companies
Can any of the company-specific risk be diversified away by investing in both Middleby Corp 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 Middleby Corp and Lowes Companies into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Middleby Corp and Lowes Companies, you can compare the effects of market volatilities on Middleby Corp 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 Middleby Corp with a short position of Lowes Companies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Middleby Corp and Lowes Companies.
Diversification Opportunities for Middleby Corp and Lowes Companies
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Middleby and Lowes is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Middleby Corp and Lowes Companies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lowes Companies and Middleby Corp 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 Middleby Corp 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 Middleby Corp i.e., Middleby Corp and Lowes Companies go up and down completely randomly.
Pair Corralation between Middleby Corp and Lowes Companies
Given the investment horizon of 90 days Middleby Corp is expected to generate 1.02 times more return on investment than Lowes Companies. However, Middleby Corp is 1.02 times more volatile than Lowes Companies. It trades about -0.15 of its potential returns per unit of risk. Lowes Companies is currently generating about -0.16 per unit of risk. If you would invest 15,100 in Middleby Corp on January 17, 2024 and sell it today you would lose (768.00) from holding Middleby Corp or give up 5.09% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Middleby Corp vs. Lowes Companies
Performance |
| Timeline |
| Middleby Corp |
| Lowes Companies |
Middleby Corp and Lowes Companies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Middleby Corp and Lowes Companies
The main advantage of trading using opposite Middleby Corp and Lowes Companies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Middleby Corp 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.| Middleby Corp vs. Enpro Industries | Middleby Corp vs. Kadant Inc | Middleby Corp vs. ITT Inc | Middleby Corp vs. Franklin Electric Co |
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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