Correlation Between Leggett Platt and Sleep Number
Can any of the company-specific risk be diversified away by investing in both Leggett Platt and Sleep Number 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 Sleep Number 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 Sleep Number Corp, you can compare the effects of market volatilities on Leggett Platt and Sleep Number 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 Sleep Number. Check out your portfolio center. Please also check ongoing floating volatility patterns of Leggett Platt and Sleep Number.
Diversification Opportunities for Leggett Platt and Sleep Number
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Leggett and Sleep is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Leggett Platt Incorporated and Sleep Number Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sleep Number Corp 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 Sleep Number. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sleep Number Corp has no effect on the direction of Leggett Platt i.e., Leggett Platt and Sleep Number go up and down completely randomly.
Pair Corralation between Leggett Platt and Sleep Number
Considering the 90-day investment horizon Leggett Platt Incorporated is expected to under-perform the Sleep Number. But the stock apears to be less risky and, when comparing its historical volatility, Leggett Platt Incorporated is 2.2 times less risky than Sleep Number. The stock trades about -0.08 of its potential returns per unit of risk. The Sleep Number Corp is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 1,847 in Sleep Number Corp on August 27, 2024 and sell it today you would lose (598.00) from holding Sleep Number Corp or give up 32.38% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Leggett Platt Incorporated vs. Sleep Number Corp
Performance |
| Timeline |
| Leggett Platt |
| Sleep Number Corp |
Leggett Platt and Sleep Number Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Leggett Platt and Sleep Number
The main advantage of trading using opposite Leggett Platt and Sleep Number positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Leggett Platt position performs unexpectedly, Sleep Number 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 Sleep Number will offset losses from the drop in Sleep Number's long position.| Leggett Platt vs. Willis Lease Finance | Leggett Platt vs. Rocky Brands | Leggett Platt vs. First Business Financial |
| Sleep Number vs. Purple Innovation | Sleep Number vs. Mohawk Industries | Sleep Number vs. La Z Boy Incorporated | Sleep Number vs. Leggett Platt Incorporated |
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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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