Correlation Between Lowes Companies and Genworth Financial

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

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

Diversification Opportunities for Lowes Companies and Genworth Financial

0.37

Correlation Coefficient

Lowes Companies  Genworth Financial

Weak diversification

The 3 months correlation between Lowes and Genworth is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Lowes Companies and Genworth Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Genworth Financial and Lowes Companies 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 Lowes Companies are associated (or correlated) with Genworth Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Genworth Financial has no effect on the direction of Lowes Companies i.e., Lowes Companies and Genworth Financial go up and down completely randomly.

Pair Corralation between Lowes Companies and Genworth Financial

Considering the 90-day investment horizon Lowes Companies is expected to generate 0.77 times more return on investment than Genworth Financial. However, Lowes Companies is 1.3 times less risky than Genworth Financial. It trades about 0.13 of its potential returns per unit of risk. Genworth Financial is currently generating about 0.02 per unit of risk. If you would invest  18,634  in Lowes Companies on January 20, 2024 and sell it today you would earn a total of  4,390  from holding Lowes Companies or generate 23.56% return on investment over 90 days.

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

Lowes Companies  vs.  Genworth Financial

Lowes Companies

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Lowes Companies are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Lowes Companies is not utilizing all of its potentials. The newest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Genworth Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Genworth Financial has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest conflicting performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Lowes Companies and Genworth Financial

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

The idea behind Lowes Companies and Genworth Financial 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.