Correlation Between Evil Empire and LCI Industries

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

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

Diversification Opportunities for Evil Empire and LCI Industries

0.0

Correlation Coefficient

Evil Empire  LCI Industries

Pay attention - limited upside

The 3 months correlation between Evil and LCI is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Evil Empire Designs and LCI Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LCI Industries and Evil Empire 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 Evil Empire Designs are associated (or correlated) with LCI Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LCI Industries has no effect on the direction of Evil Empire i.e., Evil Empire and LCI Industries go up and down completely randomly.

Pair Corralation between Evil Empire and LCI Industries

Given the investment horizon of 90 days Evil Empire Designs is expected to generate 29.62 times more return on investment than LCI Industries. However, Evil Empire is 29.62 times more volatile than LCI Industries. It trades about 0.06 of its potential returns per unit of risk. LCI Industries is currently generating about 0.0 per unit of risk. If you would invest  16.00  in Evil Empire Designs on September 17, 2024 and sell it today you would lose (15.95) from holding Evil Empire Designs or give up 99.69% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Evil Empire Designs  vs.  LCI Industries

Evil Empire Designs

Risk-Adjusted Performance

0 of 100

Very Weak

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

LCI Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LCI Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong forward indicators, LCI Industries is not utilizing all of its potentials. The newest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Evil Empire and LCI Industries

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

The idea behind Evil Empire Designs and LCI Industries 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.