Correlation Between Dupont De and Lowes Companies

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

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

Diversification Opportunities for Dupont De and Lowes Companies

0.6

Correlation Coefficient

Dupont De  Lowes Companies

Poor diversification

The 3 months correlation between Dupont and Lowes is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Dupont De Nemours and Lowes Companies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lowes Companies and Dupont De 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 Dupont De Nemours are associated (or correlated) with Lowes Companies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lowes Companies has no effect on the direction of Dupont De i.e., Dupont De and Lowes Companies go up and down completely randomly.

Pair Corralation between Dupont De and Lowes Companies

Allowing for the 90-day total investment horizon Dupont De is expected to generate 4.84 times less return on investment than Lowes Companies. In addition to that, Dupont De is 1.05 times more volatile than Lowes Companies. It trades about 0.03 of its total potential returns per unit of risk. Lowes Companies is currently generating about 0.14 per unit of volatility. If you would invest  24,442  in Lowes Companies on September 1, 2024 and sell it today you would earn a total of  2,801  from holding Lowes Companies or generate 11.46% return on investment over 90 days.

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

Dupont De Nemours  vs.  Lowes Companies

Dupont De Nemours

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Dupont De Nemours are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Dupont De is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Lowes Companies

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Lowes Companies are ranked lower than 10 (%) 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 December 2024.

Pair Trading with Dupont De and Lowes Companies

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

The idea behind Dupont De Nemours and Lowes Companies 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.