Correlation Between Five Below and La Z

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Can any of the company-specific risk be diversified away by investing in both Five Below 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 Five Below and La Z into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Five Below and La-Z-Boy, you can compare the effects of market volatilities on Five Below 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 Five Below with a short position of La Z. Check out your portfolio center. Please also check ongoing floating volatility patterns of Five Below and La Z.

Diversification Opportunities for Five Below and La Z

0.33
  Correlation Coefficient

Weak diversification

The 3 months correlation between Five Below and La Z is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Five Below and La-Z-Boy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on La-Z-Boy and Five Below 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 Five Below 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 Five Below i.e., Five Below and La Z go up and down completely randomly.

Pair Corralation between Five Below and La Z

Given the investment horizon of 90 days Five Below is expected to generate 1.08 times more return on investment than La Z. However, Five Below is 1.08 times more volatile than La-Z-Boy. It trades about 0.11 of its potential returns per unit of risk. La-Z-Boy is currently generating about -0.26 per unit of risk. If you would invest  12,982  in Five Below on July 4, 2022 and sell it today you would earn a total of  785.00  from holding Five Below or generate 6.05% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Five Below  vs.  La-Z-Boy

 Performance (%) 
       Timeline  
Five Below 
Five Below Performance
5 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Five Below are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Five Below exhibited solid returns over the last few months and may actually be approaching a breakup point.

Five Below Price Channel

La-Z-Boy 
La Z Performance
0 of 100
Over the last 90 days La-Z-Boy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting 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.

La Z Price Channel

Five Below and La Z Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Five Below and La Z

The main advantage of trading using opposite Five Below and La Z positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Five Below 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.
Five Below vs. Best Buy Company
The idea behind Five Below and La-Z-Boy 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.
La Z vs. Amazon Inc
Check out your portfolio center. 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.

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