Correlation Between Lovesac and Traeger

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

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

Diversification Opportunities for Lovesac and Traeger

0.01

Correlation Coefficient

Lovesac  Traeger

Significant diversification

The 3 months correlation between Lovesac and Traeger is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding The Lovesac and Traeger in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Traeger and Lovesac 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 The Lovesac are associated (or correlated) with Traeger. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Traeger has no effect on the direction of Lovesac i.e., Lovesac and Traeger go up and down completely randomly.

Pair Corralation between Lovesac and Traeger

Given the investment horizon of 90 days The Lovesac is expected to generate 1.24 times more return on investment than Traeger. However, Lovesac is 1.24 times more volatile than Traeger. It trades about -0.09 of its potential returns per unit of risk. Traeger is currently generating about -0.31 per unit of risk. If you would invest  2,279  in The Lovesac on January 20, 2024 and sell it today you would lose (199.00) from holding The Lovesac or give up 8.73% of portfolio value over 90 days.

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

The Lovesac  vs.  Traeger

Lovesac

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The Lovesac 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 sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Traeger

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Traeger has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Traeger is not utilizing all of its potentials. The newest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Lovesac and Traeger

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

The idea behind The Lovesac and Traeger 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.