Correlation Between Leggett Platt and Purple Innovation
Can any of the company-specific risk be diversified away by investing in both Leggett Platt and Purple Innovation 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 Purple Innovation into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Leggett Platt Incorporated and Purple Innovation, you can compare the effects of market volatilities on Leggett Platt and Purple Innovation 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 Purple Innovation. Check out your portfolio center. Please also check ongoing floating volatility patterns of Leggett Platt and Purple Innovation.
Diversification Opportunities for Leggett Platt and Purple Innovation
0.26 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Leggett and Purple is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Leggett Platt Incorporated and Purple Innovation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Purple Innovation 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 Incorporated are associated (or correlated) with Purple Innovation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Purple Innovation has no effect on the direction of Leggett Platt i.e., Leggett Platt and Purple Innovation go up and down completely randomly.
Pair Corralation between Leggett Platt and Purple Innovation
Considering the 90-day investment horizon Leggett Platt Incorporated is expected to under-perform the Purple Innovation. But the stock apears to be less risky and, when comparing its historical volatility, Leggett Platt Incorporated is 2.4 times less risky than Purple Innovation. The stock trades about -0.08 of its potential returns per unit of risk. The Purple Innovation is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest 287.00 in Purple Innovation on August 27, 2024 and sell it today you would lose (199.00) from holding Purple Innovation or give up 69.34% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Leggett Platt Incorporated vs. Purple Innovation
Performance |
| Timeline |
| Leggett Platt |
| Purple Innovation |
Leggett Platt and Purple Innovation Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Leggett Platt and Purple Innovation
The main advantage of trading using opposite Leggett Platt and Purple Innovation positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Leggett Platt position performs unexpectedly, Purple Innovation 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 Purple Innovation will offset losses from the drop in Purple Innovation's long position.| Leggett Platt vs. Willis Lease Finance | Leggett Platt vs. Rocky Brands | Leggett Platt vs. First Business Financial |
| Purple Innovation vs. Tempur Sealy International | Purple Innovation vs. La Z Boy Incorporated | Purple Innovation vs. MasterBrand | Purple Innovation vs. Ethan Allen Interiors |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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