Correlation Between LCI Industries and Winnebago Industries

Can any of the company-specific risk be diversified away by investing in both LCI Industries and Winnebago 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 Winnebago 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 Winnebago Industries, you can compare the effects of market volatilities on LCI Industries and Winnebago 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 Winnebago Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of LCI Industries and Winnebago Industries.

Diversification Opportunities for LCI Industries and Winnebago Industries

0.81

Correlation Coefficient

LCI Industries  Winnebago Industries

Very poor diversification

The 3 months correlation between LCI and Winnebago is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding LCI Industries and Winnebago Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Winnebago 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 Winnebago Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Winnebago Industries has no effect on the direction of LCI Industries i.e., LCI Industries and Winnebago Industries go up and down completely randomly.

Pair Corralation between LCI Industries and Winnebago Industries

Given the investment horizon of 90 days LCI Industries is expected to generate 0.71 times more return on investment than Winnebago Industries. However, LCI Industries is 1.41 times less risky than Winnebago Industries. It trades about -0.1 of its potential returns per unit of risk. Winnebago Industries is currently generating about -0.13 per unit of risk. If you would invest  10,061  in LCI Industries on December 28, 2024 and sell it today you would lose (1,321) from holding LCI Industries or give up 13.13% of portfolio value over 90 days.

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

LCI Industries  vs.  Winnebago Industries

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 uncertain performance in the last few months, the Stock's forward indicators remain fairly strong which may send shares a bit higher in April 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Winnebago Industries

Risk-Adjusted Performance

Very Weak

Over the last 90 days Winnebago Industries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's technical and fundamental indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with LCI Industries and Winnebago Industries

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

The idea behind LCI Industries and Winnebago 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 Valuation module to check real value of public entities based on technical and fundamental data.