Correlation Between LCI Industries and Thor Industries

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

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

Diversification Opportunities for LCI Industries and Thor Industries

0.63

Correlation Coefficient

LCI Industries  Thor Industries

Poor diversification

The 3 months correlation between LCI and Thor is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding LCI Industries and Thor Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thor Industries 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 Thor Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thor Industries has no effect on the direction of LCI Industries i.e., LCI Industries and Thor Industries go up and down completely randomly.

Pair Corralation between LCI Industries and Thor Industries

Given the investment horizon of 90 days LCI Industries is expected to generate 1.05 times less return on investment than Thor Industries. But when comparing it to its historical volatility, LCI Industries is 1.05 times less risky than Thor Industries. It trades about 0.04 of its potential returns per unit of risk. Thor Industries is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  10,674  in Thor Industries on August 30, 2024 and sell it today you would earn a total of  439.00  from holding Thor Industries or generate 4.11% return on investment over 90 days.

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

LCI Industries  vs.  Thor Industries

LCI Industries

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in LCI Industries are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. 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.

Thor Industries

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Thor Industries are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical indicators, Thor Industries is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with LCI Industries and Thor Industries

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

The idea behind LCI Industries and Thor 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.