Correlation Between Leggett Platt and Indutrade
Can any of the company-specific risk be diversified away by investing in both Leggett Platt and Indutrade 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 Leggett Platt and Indutrade into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Leggett Platt and Indutrade AB, you can compare the effects of market volatilities on Leggett Platt and Indutrade 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 Leggett Platt with a short position of Indutrade. Check out your portfolio center. Please also check ongoing floating volatility patterns of Leggett Platt and Indutrade.
Diversification Opportunities for Leggett Platt and Indutrade
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Leggett and Indutrade is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Leggett Platt and Indutrade AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Indutrade AB and Leggett Platt 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 Leggett Platt are associated (or correlated) with Indutrade. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Indutrade AB has no effect on the direction of Leggett Platt i.e., Leggett Platt and Indutrade go up and down completely randomly.
Pair Corralation between Leggett Platt and Indutrade
Assuming the 90 days trading horizon Leggett Platt is expected to under-perform the Indutrade. In addition to that, Leggett Platt is 2.09 times more volatile than Indutrade AB. It trades about -0.03 of its total potential returns per unit of risk. Indutrade AB is currently generating about -0.05 per unit of volatility. If you would invest 30,210 in Indutrade AB on September 13, 2024 and sell it today you would lose (1,560) from holding Indutrade AB or give up 5.16% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Leggett Platt vs. Indutrade AB
Performance |
| Timeline |
| Leggett Platt |
| Indutrade AB |
Leggett Platt and Indutrade Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Leggett Platt and Indutrade
The main advantage of trading using opposite Leggett Platt and Indutrade positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Leggett Platt position performs unexpectedly, Indutrade 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 Indutrade will offset losses from the drop in Indutrade's long position.| Leggett Platt vs. Melia Hotels | Leggett Platt vs. Indutrade AB | Leggett Platt vs. LPKF Laser Electronics | Leggett Platt vs. Flow Traders NV |
| Indutrade vs. Playtech Plc | Indutrade vs. Zoom Video Communications | Indutrade vs. Infrastrutture Wireless Italiane | Indutrade vs. PureTech Health plc |
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 the Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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