Correlation Between LCI Industries and YETI Holdings

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

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

Diversification Opportunities for LCI Industries and YETI Holdings

0.55

Correlation Coefficient

LCI Industries  YETI Holdings

Very weak diversification

The 3 months correlation between LCI and YETI is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding LCI Industries and YETI Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on YETI Holdings and LCI 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 LCI Industries are associated (or correlated) with YETI Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of YETI Holdings has no effect on the direction of LCI Industries i.e., LCI Industries and YETI Holdings go up and down completely randomly.

Pair Corralation between LCI Industries and YETI Holdings

Given the investment horizon of 90 days LCI Industries is expected to generate 0.94 times more return on investment than YETI Holdings. However, LCI Industries is 1.07 times less risky than YETI Holdings. It trades about 0.06 of its potential returns per unit of risk. YETI Holdings is currently generating about 0.03 per unit of risk. If you would invest  11,343  in LCI Industries on September 3, 2024 and sell it today you would earn a total of  738.00  from holding LCI Industries or generate 6.51% return on investment over 90 days.

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

LCI Industries  vs.  YETI Holdings

LCI Industries

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in LCI Industries are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite fairly uncertain forward indicators, LCI Industries may actually be approaching a critical reversion point that can send shares even higher in January 2025.

YETI Holdings

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in YETI Holdings are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, YETI Holdings is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with LCI Industries and YETI Holdings

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

The idea behind LCI Industries and YETI 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .