Correlation Between Lowes Companies and Mosaic

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

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

Diversification Opportunities for Lowes Companies and Mosaic

0.41

Correlation Coefficient

Lowes Companies  Mosaic

Very weak diversification

The 3 months correlation between Lowes and Mosaic is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Lowes Companies and The Mosaic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mosaic 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 Mosaic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mosaic has no effect on the direction of Lowes Companies i.e., Lowes Companies and Mosaic go up and down completely randomly.

Pair Corralation between Lowes Companies and Mosaic

Considering the 90-day investment horizon Lowes Companies is expected to under-perform the Mosaic. But the stock apears to be less risky and, when comparing its historical volatility, Lowes Companies is 1.5 times less risky than Mosaic. The stock trades about -0.35 of its potential returns per unit of risk. The The Mosaic is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  3,129  in The Mosaic on January 25, 2024 and sell it today you would lose (80.00) from holding The Mosaic or give up 2.56% of portfolio value over 90 days.

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

Lowes Companies  vs.  The Mosaic

Lowes Companies

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Lowes Companies are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, Lowes Companies may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Mosaic

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The Mosaic has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Mosaic 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 Lowes Companies and Mosaic

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

The idea behind Lowes Companies and The Mosaic 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.

Check out your portfolio center.

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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.