Correlation Between LL Flooring and Continental

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

By analyzing existing cross correlation between LL Flooring Holdings and Continental AG PK, you can compare the effects of market volatilities on LL Flooring and Continental 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 LL Flooring with a short position of Continental. Check out your portfolio center. Please also check ongoing floating volatility patterns of LL Flooring and Continental.

Diversification Opportunities for LL Flooring and Continental

0.78

Correlation Coefficient

LL Flooring  Continental

Poor diversification

The 3 months correlation between LL Flooring and Continental is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding LL Flooring Holdings and Continental AG PK in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Continental AG PK and LL Flooring 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 LL Flooring Holdings are associated (or correlated) with Continental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Continental AG PK has no effect on the direction of LL Flooring i.e., LL Flooring and Continental go up and down completely randomly.

Pair Corralation between LL Flooring and Continental

Allowing for the 90-day total investment horizon LL Flooring Holdings is expected to under-perform the Continental. In addition to that, LL Flooring is 2.25 times more volatile than Continental AG PK. It trades about -0.14 of its total potential returns per unit of risk. Continental AG PK is currently generating about -0.25 per unit of volatility. If you would invest  676.00  in Continental AG PK on March 16, 2024 and sell it today you would lose (48.00) from holding Continental AG PK or give up 7.1% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.45%
Values	Daily Returns

LL Flooring Holdings  vs.  Continental AG PK

LL Flooring Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LL Flooring Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's essential indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Continental AG PK

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Continental AG PK has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with LL Flooring and Continental

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

The idea behind LL Flooring Holdings and Continental AG PK 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.