Correlation Between Lovesac and Whirlpool

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

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

Diversification Opportunities for Lovesac and Whirlpool

0.81

Correlation Coefficient

Lovesac  Whirlpool

Very poor diversification

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

Pair Corralation between Lovesac and Whirlpool

Given the investment horizon of 90 days The Lovesac is expected to under-perform the Whirlpool. But the stock apears to be less risky and, when comparing its historical volatility, The Lovesac is 1.07 times less risky than Whirlpool. The stock trades about -0.13 of its potential returns per unit of risk. The Whirlpool is currently generating about -0.1 of returns per unit of risk over similar time horizon. If you would invest  11,190  in Whirlpool on December 29, 2024 and sell it today you would lose (2,239) from holding Whirlpool or give up 20.01% of portfolio value over 90 days.

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

The Lovesac  vs.  Whirlpool

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.

Whirlpool

Risk-Adjusted Performance

Very Weak

Over the last 90 days Whirlpool has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unsteady performance in the last few months, the Stock's technical indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Lovesac and Whirlpool

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

The idea behind The Lovesac and Whirlpool 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.