Correlation Between Legacy Education and SDX Energy

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Can any of the company-specific risk be diversified away by investing in both Legacy Education and SDX Energy 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 Legacy Education and SDX Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Legacy Education and SDX Energy plc, you can compare the effects of market volatilities on Legacy Education and SDX Energy 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 Legacy Education with a short position of SDX Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Legacy Education and SDX Energy.

Diversification Opportunities for Legacy Education and SDX Energy

LegacySDXDiversified AwayLegacySDXDiversified Away100%
-0.37
  Correlation Coefficient

Very good diversification

The 3 months correlation between Legacy and SDX is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Legacy Education and SDX Energy plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SDX Energy plc and Legacy Education 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 Legacy Education are associated (or correlated) with SDX Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SDX Energy plc has no effect on the direction of Legacy Education i.e., Legacy Education and SDX Energy go up and down completely randomly.

Pair Corralation between Legacy Education and SDX Energy

Given the investment horizon of 90 days Legacy Education is expected to generate 225.77 times less return on investment than SDX Energy. But when comparing it to its historical volatility, Legacy Education is 15.6 times less risky than SDX Energy. It trades about 0.01 of its potential returns per unit of risk. SDX Energy plc is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  2.00  in SDX Energy plc on November 26, 2024 and sell it today you would lose (0.58) from holding SDX Energy plc or give up 29.0% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy95.24%
ValuesDaily Returns

Legacy Education  vs.  SDX Energy plc

 Performance 
JavaScript chart by amCharts 3.21.15Dec2025Feb -100-50050
JavaScript chart by amCharts 3.21.15LGCY SDXEF
       Timeline  
Legacy Education 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days Legacy Education has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong fundamental indicators, Legacy Education is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb7.588.599.510
SDX Energy plc 

Risk-Adjusted Performance

OK

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in SDX Energy plc are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady technical and fundamental indicators, SDX Energy reported solid returns over the last few months and may actually be approaching a breakup point.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb0.00249999999999999840.0050.010.0150.02

Legacy Education and SDX Energy Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-17.47-13.08-8.7-4.310.07714.639.1713.818.43 0.0020.0040.0060.0080.0100.0120.014
JavaScript chart by amCharts 3.21.15LGCY SDXEF
       Returns  

Pair Trading with Legacy Education and SDX Energy

The main advantage of trading using opposite Legacy Education and SDX Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Legacy Education position performs unexpectedly, SDX Energy 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 SDX Energy will offset losses from the drop in SDX Energy's long position.
The idea behind Legacy Education and SDX Energy plc 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.

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