Correlation Between Lowes Companies and Raytech Holding

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

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

Diversification Opportunities for Lowes Companies and Raytech Holding

-0.44

Correlation Coefficient

Lowes Companies  Raytech Holding

Very good diversification

The 3 months correlation between Lowes and Raytech is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Lowes Companies and Raytech Holding Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Raytech Holding and Lowes Companies 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 Lowes Companies are associated (or correlated) with Raytech Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Raytech Holding has no effect on the direction of Lowes Companies i.e., Lowes Companies and Raytech Holding go up and down completely randomly.

Pair Corralation between Lowes Companies and Raytech Holding

Considering the 90-day investment horizon Lowes Companies is expected to generate 0.24 times more return on investment than Raytech Holding. However, Lowes Companies is 4.19 times less risky than Raytech Holding. It trades about 0.14 of its potential returns per unit of risk. Raytech Holding Limited is currently generating about -0.02 per unit of risk. If you would invest  24,442  in Lowes Companies on September 2, 2024 and sell it today you would earn a total of  2,801  from holding Lowes Companies or generate 11.46% return on investment over 90 days.

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

Lowes Companies  vs.  Raytech Holding Limited

Lowes Companies

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Lowes Companies are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, Lowes Companies may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Raytech Holding

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Raytech Holding Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Lowes Companies and Raytech Holding

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

The idea behind Lowes Companies and Raytech Holding Limited 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.