Correlation Between LCI Industries and Charles Colvard

Can any of the company-specific risk be diversified away by investing in both LCI Industries and Charles Colvard 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 LCI Industries and Charles Colvard into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between LCI Industries and Charles Colvard, you can compare the effects of market volatilities on LCI Industries and Charles Colvard 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 LCI Industries with a short position of Charles Colvard. Check out your portfolio center. Please also check ongoing floating volatility patterns of LCI Industries and Charles Colvard.

Diversification Opportunities for LCI Industries and Charles Colvard

0.29

Correlation Coefficient

LCI Industries  Charles Colvard

Modest diversification

The 3 months correlation between LCI and Charles is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding LCI Industries and Charles Colvard in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Charles Colvard and LCI Industries 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 LCI Industries are associated (or correlated) with Charles Colvard. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Charles Colvard has no effect on the direction of LCI Industries i.e., LCI Industries and Charles Colvard go up and down completely randomly.

Pair Corralation between LCI Industries and Charles Colvard

Given the investment horizon of 90 days LCI Industries is expected to generate 0.47 times more return on investment than Charles Colvard. However, LCI Industries is 2.14 times less risky than Charles Colvard. It trades about -0.08 of its potential returns per unit of risk. Charles Colvard is currently generating about -0.11 per unit of risk. If you would invest  12,180  in LCI Industries on February 24, 2024 and sell it today you would lose (1,530) from holding LCI Industries or give up 12.56% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

LCI Industries  vs.  Charles Colvard

LCI Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LCI Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's forward indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Charles Colvard

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Charles Colvard has generated negative risk-adjusted returns adding no value to investors with long positions. Even with abnormal performance in the last few months, the Stock's technical indicators remain relatively invariable which may send shares a bit higher in June 2024. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with LCI Industries and Charles Colvard

The main advantage of trading using opposite LCI Industries and Charles Colvard positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LCI Industries position performs unexpectedly, Charles Colvard 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 Charles Colvard will offset losses from the drop in Charles Colvard's long position.

The idea behind LCI Industries and Charles Colvard pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.