Correlation Between Sleep Number and Leggett Platt
Can any of the company-specific risk be diversified away by investing in both Sleep Number and Leggett Platt 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 Sleep Number and Leggett Platt into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sleep Number Corp and Leggett Platt Incorporated, you can compare the effects of market volatilities on Sleep Number and Leggett Platt 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 Sleep Number with a short position of Leggett Platt. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sleep Number and Leggett Platt.
Diversification Opportunities for Sleep Number and Leggett Platt
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Sleep and Leggett is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Sleep Number Corp and Leggett Platt Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Leggett Platt and Sleep Number 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 Sleep Number Corp are associated (or correlated) with Leggett Platt. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Leggett Platt has no effect on the direction of Sleep Number i.e., Sleep Number and Leggett Platt go up and down completely randomly.
Pair Corralation between Sleep Number and Leggett Platt
Given the investment horizon of 90 days Sleep Number Corp is expected to generate 2.24 times more return on investment than Leggett Platt. However, Sleep Number is 2.24 times more volatile than Leggett Platt Incorporated. It trades about 0.0 of its potential returns per unit of risk. Leggett Platt Incorporated is currently generating about -0.07 per unit of risk. If you would invest 2,845 in Sleep Number Corp on August 27, 2024 and sell it today you would lose (1,596) from holding Sleep Number Corp or give up 56.1% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sleep Number Corp vs. Leggett Platt Incorporated
Performance |
| Timeline |
| Sleep Number Corp |
| Leggett Platt |
Sleep Number and Leggett Platt Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sleep Number and Leggett Platt
The main advantage of trading using opposite Sleep Number and Leggett Platt positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sleep Number position performs unexpectedly, Leggett Platt 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 Leggett Platt will offset losses from the drop in Leggett Platt's long position.| Sleep Number vs. Purple Innovation | Sleep Number vs. Mohawk Industries | Sleep Number vs. La Z Boy Incorporated | Sleep Number vs. Leggett Platt Incorporated |
| Leggett Platt vs. Willis Lease Finance | Leggett Platt vs. Rocky Brands | Leggett Platt vs. First Business Financial |
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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