Correlation Between La Z and Lovesac

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

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

Diversification Opportunities for La Z and Lovesac

0.57

Correlation Coefficient

La Z  Lovesac

Very weak diversification

The 3 months correlation between LZB and Lovesac is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding La Z Boy Incorporated and The Lovesac in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lovesac and La Z 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 La Z Boy Incorporated are associated (or correlated) with Lovesac. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lovesac has no effect on the direction of La Z i.e., La Z and Lovesac go up and down completely randomly.

Pair Corralation between La Z and Lovesac

Considering the 90-day investment horizon La Z is expected to generate 1.53 times less return on investment than Lovesac. But when comparing it to its historical volatility, La Z Boy Incorporated is 2.18 times less risky than Lovesac. It trades about 0.53 of its potential returns per unit of risk. The Lovesac is currently generating about 0.37 of returns per unit of risk over similar time horizon. If you would invest  2,916  in The Lovesac on September 1, 2024 and sell it today you would earn a total of  856.00  from holding The Lovesac or generate 29.36% return on investment over 90 days.

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

La Z Boy Incorporated  vs.  The Lovesac

La Z Boy

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in La Z Boy Incorporated are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, La Z may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Lovesac

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in The Lovesac are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Lovesac exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with La Z and Lovesac

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

The idea behind La Z Boy Incorporated and The Lovesac 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.