Correlation Between Lovesac and Aterian

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

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

Diversification Opportunities for Lovesac and Aterian

0.22

Correlation Coefficient

Lovesac  Aterian

Modest diversification

The 3 months correlation between Lovesac and Aterian is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding The Lovesac and Aterian in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aterian and Lovesac 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 The Lovesac are associated (or correlated) with Aterian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aterian has no effect on the direction of Lovesac i.e., Lovesac and Aterian go up and down completely randomly.

Pair Corralation between Lovesac and Aterian

Given the investment horizon of 90 days The Lovesac is expected to under-perform the Aterian. But the stock apears to be less risky and, when comparing its historical volatility, The Lovesac is 2.25 times less risky than Aterian. The stock trades about -0.13 of its potential returns per unit of risk. The Aterian is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  255.00  in Aterian on December 29, 2024 and sell it today you would lose (25.00) from holding Aterian or give up 9.8% of portfolio value over 90 days.

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

The Lovesac  vs.  Aterian

Lovesac

Risk-Adjusted Performance

Very Weak

Over the last 90 days The Lovesac has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Aterian

Risk-Adjusted Performance

Very Weak

Over the last 90 days Aterian has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable technical and fundamental indicators, Aterian is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Lovesac and Aterian

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

The idea behind The Lovesac and Aterian 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.