Correlation Between USU Software and La Z

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

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

Diversification Opportunities for USU Software and La Z

-0.4

Correlation Coefficient

USU Software  La Z

Very good diversification

The 3 months correlation between USU and LAZ is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding USU Software AG and La Z Boy Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on La Z Boy and USU Software 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 USU Software AG are associated (or correlated) with La Z. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of La Z Boy has no effect on the direction of USU Software i.e., USU Software and La Z go up and down completely randomly.

Pair Corralation between USU Software and La Z

Assuming the 90 days trading horizon USU Software is expected to generate 3.02 times less return on investment than La Z. In addition to that, USU Software is 1.11 times more volatile than La Z Boy Incorporated. It trades about 0.1 of its total potential returns per unit of risk. La Z Boy Incorporated is currently generating about 0.33 per unit of volatility. If you would invest  4,080  in La Z Boy Incorporated on October 24, 2024 and sell it today you would earn a total of  260.00  from holding La Z Boy Incorporated or generate 6.37% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	94.44%
Values	Daily Returns

USU Software AG  vs.  La Z Boy Incorporated

USU Software AG

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in USU Software AG are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, USU Software is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

La Z Boy

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in La Z Boy Incorporated are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, La Z reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with USU Software and La Z

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

The idea behind USU Software AG and La Z Boy Incorporated 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.

Check out your portfolio center.

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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.