Correlation Between La Z and Energy Focu

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Can any of the company-specific risk be diversified away by investing in both La Z and Energy Focu 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 La Z and Energy Focu into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between La Z Boy Incorporated and Energy Focu, you can compare the effects of market volatilities on La Z and Energy Focu 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 La Z with a short position of Energy Focu. Check out your portfolio center. Please also check ongoing floating volatility patterns of La Z and Energy Focu.

Diversification Opportunities for La Z and Energy Focu

0.12
  Correlation Coefficient

Average diversification

The 3 months correlation between LZB and Energy is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding La-Z-Boy Incorporated and Energy Focu in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Energy Focu and La Z 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 La Z Boy Incorporated are associated (or correlated) with Energy Focu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Energy Focu has no effect on the direction of La Z i.e., La Z and Energy Focu go up and down completely randomly.

Pair Corralation between La Z and Energy Focu

Considering the 90-day investment horizon La Z Boy Incorporated is expected to generate 0.33 times more return on investment than Energy Focu. However, La Z Boy Incorporated is 3.02 times less risky than Energy Focu. It trades about 0.01 of its potential returns per unit of risk. Energy Focu is currently generating about -0.23 per unit of risk. If you would invest  3,764  in La Z Boy Incorporated on December 29, 2023 and sell it today you would lose (2.00) from holding La Z Boy Incorporated or give up 0.05% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy95.65%
ValuesDaily Returns

La-Z-Boy Incorporated  vs.  Energy Focu

 Performance 
       Timeline  
La-Z-Boy rporated 

Risk-Adjusted Performance

2 of 100

 
Low
 
High
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in La Z Boy Incorporated are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, La Z is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.
Energy Focu 

Risk-Adjusted Performance

3 of 100

 
Low
 
High
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Energy Focu are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating basic indicators, Energy Focu demonstrated solid returns over the last few months and may actually be approaching a breakup point.

La Z and Energy Focu Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with La Z and Energy Focu

The main advantage of trading using opposite La Z and Energy Focu positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if La Z position performs unexpectedly, Energy Focu 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 Energy Focu will offset losses from the drop in Energy Focu's long position.
The idea behind La Z Boy Incorporated and Energy Focu 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.

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