Correlation Between Installed Building and LCI Industries

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

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

Diversification Opportunities for Installed Building and LCI Industries

0.38

Correlation Coefficient

Installed Building  LCI Industries

Weak diversification

The 3 months correlation between Installed and LCI is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Installed Building Products and LCI Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LCI Industries and Installed Building 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 Installed Building Products are associated (or correlated) with LCI Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LCI Industries has no effect on the direction of Installed Building i.e., Installed Building and LCI Industries go up and down completely randomly.

Pair Corralation between Installed Building and LCI Industries

Considering the 90-day investment horizon Installed Building Products is expected to generate 1.74 times more return on investment than LCI Industries. However, Installed Building is 1.74 times more volatile than LCI Industries. It trades about 0.14 of its potential returns per unit of risk. LCI Industries is currently generating about -0.06 per unit of risk. If you would invest  20,419  in Installed Building Products on July 25, 2025 and sell it today you would earn a total of  5,858  from holding Installed Building Products or generate 28.69% return on investment over 90 days.

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

Installed Building Products  vs.  LCI Industries

Installed Building

Risk-Adjusted Performance

Fair

Compared to the overall equity markets, risk-adjusted returns on investments in Installed Building Products are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady fundamental drivers, Installed Building reported solid returns over the last few months and may actually be approaching a breakup point.

LCI Industries

Risk-Adjusted Performance

Weakest

Over the last 90 days LCI Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's forward indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Pair Trading with Installed Building and LCI Industries

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

The idea behind Installed Building Products and LCI 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.