Correlation Between Whirlpool and Lovesac

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

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

Diversification Opportunities for Whirlpool and Lovesac

0.82

Correlation Coefficient

Whirlpool  Lovesac

Very poor diversification

The 3 months correlation between Whirlpool and Lovesac is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Whirlpool and The Lovesac in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lovesac and Whirlpool 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 Whirlpool 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 Whirlpool i.e., Whirlpool and Lovesac go up and down completely randomly.

Pair Corralation between Whirlpool and Lovesac

Considering the 90-day investment horizon Whirlpool is expected to generate 1.46 times less return on investment than Lovesac. But when comparing it to its historical volatility, Whirlpool is 1.21 times less risky than Lovesac. It trades about 0.16 of its potential returns per unit of risk. The Lovesac is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  2,625  in The Lovesac on September 13, 2024 and sell it today you would earn a total of  1,143  from holding The Lovesac or generate 43.54% return on investment over 90 days.

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

Whirlpool  vs.  The Lovesac

Whirlpool

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Whirlpool are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady technical indicators, Whirlpool reported solid returns over the last few months and may actually be approaching a breakup point.

Lovesac

Risk-Adjusted Performance

15 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in The Lovesac are ranked lower than 15 (%) 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 Whirlpool and Lovesac

The main advantage of trading using opposite Whirlpool and Lovesac positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Whirlpool 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 Whirlpool 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.