Correlation Between SIFCO Industries and Loar Holdings

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

By analyzing existing cross correlation between SIFCO Industries and Loar Holdings, you can compare the effects of market volatilities on SIFCO Industries and Loar Holdings 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 SIFCO Industries with a short position of Loar Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of SIFCO Industries and Loar Holdings.

Diversification Opportunities for SIFCO Industries and Loar Holdings

-0.75

Correlation Coefficient

SIFCO Industries  Loar Holdings

Pay attention - limited upside

The 3 months correlation between SIFCO and Loar is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding SIFCO Industries and Loar Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Loar Holdings and SIFCO Industries 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 SIFCO Industries are associated (or correlated) with Loar Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Loar Holdings has no effect on the direction of SIFCO Industries i.e., SIFCO Industries and Loar Holdings go up and down completely randomly.

Pair Corralation between SIFCO Industries and Loar Holdings

Considering the 90-day investment horizon SIFCO Industries is expected to generate 1.25 times less return on investment than Loar Holdings. In addition to that, SIFCO Industries is 1.04 times more volatile than Loar Holdings. It trades about 0.06 of its total potential returns per unit of risk. Loar Holdings is currently generating about 0.08 per unit of volatility. If you would invest  5,939  in Loar Holdings on September 14, 2024 and sell it today you would earn a total of  1,975  from holding Loar Holdings or generate 33.25% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.41%
Values	Daily Returns

SIFCO Industries  vs.  Loar Holdings

SIFCO Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SIFCO Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's forward indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Loar Holdings

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Loar Holdings are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating basic indicators, Loar Holdings may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with SIFCO Industries and Loar Holdings

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

The idea behind SIFCO Industries and Loar Holdings 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.