Can any of the company-specific risk be diversified away by investing in both LL Flooring and Duluth 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 LL Flooring and Duluth Holdings 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 Duluth Holdings, you can compare the effects of market volatilities on LL Flooring and Duluth 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 LL Flooring with a short position of Duluth Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of LL Flooring and Duluth Holdings.
Diversification Opportunities for LL Flooring and Duluth Holdings
The 3 months correlation between LL Flooring and Duluth is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding LL Flooring Holdings and Duluth Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Duluth Holdings 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 Duluth Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Duluth Holdings has no effect on the direction of LL Flooring i.e., LL Flooring and Duluth Holdings go up and down completely randomly.
Pair Corralation between LL Flooring and Duluth Holdings
Allowing for the 90-day total investment horizon LL Flooring Holdings is expected to generate 1.08 times more return on investment than Duluth Holdings. However, LL Flooring is 1.08 times more volatile than Duluth Holdings. It trades about -0.07 of its potential returns per unit of risk. Duluth Holdings is currently generating about -0.2 per unit of risk. If you would invest 183.00 in LL Flooring Holdings on March 6, 2024 and sell it today you would lose (18.00) from holding LL Flooring Holdings or give up 9.84% of portfolio value over 90 days.
Over the last 90 days LL Flooring Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's essential indicators remain quite persistent which may send shares a bit higher in July 2024. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.
Over the last 90 days Duluth Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in July 2024. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.