Correlation Between La Z and FGI Industries

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

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

Diversification Opportunities for La Z and FGI Industries

-0.35

Correlation Coefficient

La Z  FGI Industries

Very good diversification

The 3 months correlation between LZB and FGI is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding La Z Boy Incorporated and FGI Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FGI Industries and La Z 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 La Z Boy Incorporated are associated (or correlated) with FGI Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FGI Industries has no effect on the direction of La Z i.e., La Z and FGI Industries go up and down completely randomly.

Pair Corralation between La Z and FGI Industries

Considering the 90-day investment horizon La Z is expected to generate 1.48 times less return on investment than FGI Industries. But when comparing it to its historical volatility, La Z Boy Incorporated is 3.06 times less risky than FGI Industries. It trades about 0.09 of its potential returns per unit of risk. FGI Industries is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  74.00  in FGI Industries on August 31, 2024 and sell it today you would earn a total of  5.00  from holding FGI Industries or generate 6.76% return on investment over 90 days.

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

La Z Boy Incorporated  vs.  FGI Industries

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 inconsistent basic indicators, La Z may actually be approaching a critical reversion point that can send shares even higher in December 2024.

FGI Industries

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in FGI Industries are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite fairly fragile technical and fundamental indicators, FGI Industries demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with La Z and FGI Industries

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

The idea behind La Z Boy Incorporated and FGI 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.