Correlation Between Flexsteel Industries and La Z

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

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

Diversification Opportunities for Flexsteel Industries and La Z

0.2

Correlation Coefficient

Flexsteel Industries  La Z

Modest diversification

The 3 months correlation between Flexsteel and LZB is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Flexsteel Industries 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 Flexsteel 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 Flexsteel Industries 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 Flexsteel Industries i.e., Flexsteel Industries and La Z go up and down completely randomly.

Pair Corralation between Flexsteel Industries and La Z

Given the investment horizon of 90 days Flexsteel Industries is expected to generate 1.57 times more return on investment than La Z. However, Flexsteel Industries is 1.57 times more volatile than La Z Boy Incorporated. It trades about 0.11 of its potential returns per unit of risk. La Z Boy Incorporated is currently generating about 0.08 per unit of risk. If you would invest  3,634  in Flexsteel Industries on September 2, 2024 and sell it today you would earn a total of  2,269  from holding Flexsteel Industries or generate 62.44% return on investment over 90 days.

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

Flexsteel Industries  vs.  La Z Boy Incorporated

Flexsteel Industries

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Flexsteel Industries are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Flexsteel Industries unveiled solid returns over the last few months and may actually be approaching a breakup point.

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 January 2025.

Pair Trading with Flexsteel Industries and La Z

The main advantage of trading using opposite Flexsteel Industries and La Z positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Flexsteel Industries 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 Flexsteel Industries 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.

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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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.