Correlation Between LCI Industries and Carbon Revolution

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

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

Diversification Opportunities for LCI Industries and Carbon Revolution

-0.51

Correlation Coefficient

LCI Industries  Carbon Revolution

Excellent diversification

The 3 months correlation between LCI and Carbon is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding LCI Industries and Carbon Revolution Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carbon Revolution Public and LCI Industries 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 LCI Industries are associated (or correlated) with Carbon Revolution. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Carbon Revolution Public has no effect on the direction of LCI Industries i.e., LCI Industries and Carbon Revolution go up and down completely randomly.

Pair Corralation between LCI Industries and Carbon Revolution

Given the investment horizon of 90 days LCI Industries is expected to generate 0.2 times more return on investment than Carbon Revolution. However, LCI Industries is 4.88 times less risky than Carbon Revolution. It trades about 0.0 of its potential returns per unit of risk. Carbon Revolution Public is currently generating about 0.0 per unit of risk. If you would invest  11,189  in LCI Industries on October 3, 2024 and sell it today you would lose (850.00) from holding LCI Industries or give up 7.6% of portfolio value over 90 days.

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

LCI Industries  vs.  Carbon Revolution Public

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 latest uncertain performance, the Stock's forward indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Carbon Revolution Public

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Carbon Revolution Public are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak technical and fundamental indicators, Carbon Revolution showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with LCI Industries and Carbon Revolution

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

The idea behind LCI Industries and Carbon Revolution Public 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.