Correlation Between H-FARM SPA and La-Z-Boy Incorporated

Can any of the company-specific risk be diversified away by investing in both H-FARM SPA and La-Z-Boy Incorporated 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 H-FARM SPA and La-Z-Boy Incorporated into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between H FARM SPA and La Z Boy Incorporated, you can compare the effects of market volatilities on H-FARM SPA and La-Z-Boy Incorporated 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 H-FARM SPA with a short position of La-Z-Boy Incorporated. Check out your portfolio center. Please also check ongoing floating volatility patterns of H-FARM SPA and La-Z-Boy Incorporated.

Diversification Opportunities for H-FARM SPA and La-Z-Boy Incorporated

-0.36

Correlation Coefficient

H-FARM SPA  La-Z-Boy Incorporated

Very good diversification

The 3 months correlation between H-FARM and La-Z-Boy is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding H FARM SPA and La Z Boy Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on La-Z-Boy Incorporated and H-FARM SPA 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 H FARM SPA are associated (or correlated) with La-Z-Boy Incorporated. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of La-Z-Boy Incorporated has no effect on the direction of H-FARM SPA i.e., H-FARM SPA and La-Z-Boy Incorporated go up and down completely randomly.

Pair Corralation between H-FARM SPA and La-Z-Boy Incorporated

Assuming the 90 days horizon H-FARM SPA is expected to generate 2.68 times less return on investment than La-Z-Boy Incorporated. In addition to that, H-FARM SPA is 2.48 times more volatile than La Z Boy Incorporated. It trades about 0.01 of its total potential returns per unit of risk. La Z Boy Incorporated is currently generating about 0.06 per unit of volatility. If you would invest  2,460  in La Z Boy Incorporated on October 23, 2024 and sell it today you would earn a total of  1,860  from holding La Z Boy Incorporated or generate 75.61% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

H FARM SPA  vs.  La Z Boy Incorporated

H FARM SPA

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in H FARM SPA are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, H-FARM SPA reported solid returns over the last few months and may actually be approaching a breakup point.

La-Z-Boy Incorporated

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in La Z Boy Incorporated are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, La-Z-Boy Incorporated reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with H-FARM SPA and La-Z-Boy Incorporated

The main advantage of trading using opposite H-FARM SPA and La-Z-Boy Incorporated positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if H-FARM SPA position performs unexpectedly, La-Z-Boy Incorporated 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 La-Z-Boy Incorporated will offset losses from the drop in La-Z-Boy Incorporated's long position.

The idea behind H FARM SPA and La Z Boy Incorporated 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.