Correlation Between Lovesac and TravelCenters

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

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

Diversification Opportunities for Lovesac and TravelCenters

0.68

Correlation Coefficient

Lovesac  TravelCenters

Poor diversification

The 3 months correlation between Lovesac and TravelCenters is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding The Lovesac and TravelCenters Of America in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TravelCenters Of America 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 TravelCenters. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TravelCenters Of America has no effect on the direction of Lovesac i.e., Lovesac and TravelCenters go up and down completely randomly.

Pair Corralation between Lovesac and TravelCenters

If you would invest  2,635  in The Lovesac on September 16, 2024 and sell it today you would lose (1.00) from holding The Lovesac or give up 0.04% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	1.54%
Values	Daily Returns

The Lovesac  vs.  TravelCenters Of America

Lovesac

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in The Lovesac are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Lovesac may actually be approaching a critical reversion point that can send shares even higher in January 2025.

TravelCenters Of America

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TravelCenters Of America has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, TravelCenters is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Lovesac and TravelCenters

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

The idea behind The Lovesac and TravelCenters Of America 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.