Correlation Between La Z and Axcella Health

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

Diversification Opportunities for La Z and Axcella Health

0.69
  Correlation Coefficient

Poor diversification

The 3 months correlation between La Z and Axcella is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding La-Z-Boy and Axcella Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Axcella Health 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 are associated (or correlated) with Axcella Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Axcella Health has no effect on the direction of La Z i.e., La Z and Axcella Health go up and down completely randomly.

Pair Corralation between La Z and Axcella Health

Considering the 90-day investment horizon La-Z-Boy is expected to generate 0.41 times more return on investment than Axcella Health. However, La-Z-Boy is 2.45 times less risky than Axcella Health. It trades about -0.02 of its potential returns per unit of risk. Axcella Health is currently generating about -0.01 per unit of risk. If you would invest  3,179  in La-Z-Boy on June 28, 2022 and sell it today you would lose (882.00)  from holding La-Z-Boy or give up 27.74% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

La-Z-Boy  vs.  Axcella Health

 Performance (%) 
       Timeline  
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 somewhat strong basic indicators, La Z is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

La Z Price Channel

Axcella Health 
Axcella Performance
0 of 100
Over the last 90 days Axcella Health has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong essential indicators, Axcella Health is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Axcella Price Channel

La Z and Axcella Health Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with La Z and Axcella Health

The main advantage of trading using opposite La Z and Axcella Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if La Z position performs unexpectedly, Axcella Health 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 Axcella Health will offset losses from the drop in Axcella Health's long position.
La Z vs. Clearwater Paper Corp
The idea behind La-Z-Boy and Axcella Health 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.
Axcella Health vs. Clearwater Paper Corp
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.

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