Correlation Between Twin Vee and LCI Industries

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

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

Diversification Opportunities for Twin Vee and LCI Industries

0.01

Correlation Coefficient

Twin Vee  LCI Industries

Significant diversification

The 3 months correlation between Twin and LCI is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Twin Vee Powercats and LCI Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LCI Industries and Twin Vee 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 Twin Vee Powercats are associated (or correlated) with LCI Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LCI Industries has no effect on the direction of Twin Vee i.e., Twin Vee and LCI Industries go up and down completely randomly.

Pair Corralation between Twin Vee and LCI Industries

Given the investment horizon of 90 days Twin Vee Powercats is expected to under-perform the LCI Industries. In addition to that, Twin Vee is 3.48 times more volatile than LCI Industries. It trades about -0.02 of its total potential returns per unit of risk. LCI Industries is currently generating about -0.01 per unit of volatility. If you would invest  11,280  in LCI Industries on December 5, 2024 and sell it today you would lose (1,492) from holding LCI Industries or give up 13.23% of portfolio value over 90 days.

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

Twin Vee Powercats  vs.  LCI Industries

Twin Vee Powercats

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Twin Vee Powercats are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather abnormal technical and fundamental indicators, Twin Vee exhibited solid returns over the last few months and may actually be approaching a breakup point.

LCI Industries

Risk-Adjusted Performance

Very Weak

Over the last 90 days LCI Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's forward indicators remain fairly strong which may send shares a bit higher in April 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Twin Vee and LCI Industries

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

The idea behind Twin Vee Powercats and LCI Industries 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.