Correlation Between LCI Industries and GATX

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

By analyzing existing cross correlation between LCI Industries and GATX Corporation, you can compare the effects of market volatilities on LCI Industries and GATX 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 GATX. Check out your portfolio center. Please also check ongoing floating volatility patterns of LCI Industries and GATX.

Diversification Opportunities for LCI Industries and GATX

0.39

Correlation Coefficient

LCI Industries  GATX

Weak diversification

The 3 months correlation between LCI and GATX is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding LCI Industries and GATX Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GATX 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 GATX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GATX has no effect on the direction of LCI Industries i.e., LCI Industries and GATX go up and down completely randomly.

Pair Corralation between LCI Industries and GATX

Given the investment horizon of 90 days LCI Industries is expected to under-perform the GATX. In addition to that, LCI Industries is 1.52 times more volatile than GATX Corporation. It trades about -0.09 of its total potential returns per unit of risk. GATX Corporation is currently generating about 0.04 per unit of volatility. If you would invest  15,485  in GATX Corporation on December 27, 2024 and sell it today you would earn a total of  365.00  from holding GATX Corporation or generate 2.36% return on investment over 90 days.

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

LCI Industries  vs.  GATX Corp.

LCI Industries

Risk-Adjusted Performance

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.

GATX

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in GATX Corporation are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, GATX is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with LCI Industries and GATX

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

The idea behind LCI Industries and GATX Corporation 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.