Correlation Between LCI Industries and MCBC Holdings

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

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

Diversification Opportunities for LCI Industries and MCBC Holdings

0.51

Correlation Coefficient

LCI Industries  MCBC Holdings

Very weak diversification

The 3 months correlation between LCI and MCBC is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding LCI Industries and MCBC Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MCBC Holdings 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 MCBC Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MCBC Holdings has no effect on the direction of LCI Industries i.e., LCI Industries and MCBC Holdings go up and down completely randomly.

Pair Corralation between LCI Industries and MCBC Holdings

Given the investment horizon of 90 days LCI Industries is expected to under-perform the MCBC Holdings. In addition to that, LCI Industries is 1.07 times more volatile than MCBC Holdings. It trades about -0.1 of its total potential returns per unit of risk. MCBC Holdings is currently generating about -0.05 per unit of volatility. If you would invest  2,200  in MCBC Holdings on January 26, 2024 and sell it today you would lose (69.00) from holding MCBC Holdings or give up 3.14% of portfolio value over 90 days.

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

LCI Industries  vs.  MCBC Holdings

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 fairly strong forward indicators, LCI Industries is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

MCBC Holdings

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in MCBC Holdings are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, MCBC Holdings is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with LCI Industries and MCBC Holdings

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

The idea behind LCI Industries and MCBC Holdings 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.