Correlation Between Lovesac and TPX Old

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

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

Diversification Opportunities for Lovesac and TPX Old

-0.83

Correlation Coefficient

Lovesac  TPX Old

Pay attention - limited upside

The 3 months correlation between Lovesac and TPX is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding The Lovesac and TPX Old in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TPX Old 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 TPX Old. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TPX Old has no effect on the direction of Lovesac i.e., Lovesac and TPX Old go up and down completely randomly.

Pair Corralation between Lovesac and TPX Old

Given the investment horizon of 90 days The Lovesac is expected to under-perform the TPX Old. In addition to that, Lovesac is 1.49 times more volatile than TPX Old. It trades about -0.13 of its total potential returns per unit of risk. TPX Old is currently generating about 0.31 per unit of volatility. If you would invest  5,698  in TPX Old on December 29, 2024 and sell it today you would earn a total of  1,180  from holding TPX Old or generate 20.71% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	54.1%
Values	Daily Returns

The Lovesac  vs.  TPX Old

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.

TPX Old

Risk-Adjusted Performance

Solid

Over the last 90 days TPX Old has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly weak basic indicators, TPX Old showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lovesac and TPX Old

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

The idea behind The Lovesac and TPX Old 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 Global Correlations module to find global opportunities by holding instruments from different markets.