Correlation Between Dogness International and Legacy Housing

Can any of the company-specific risk be diversified away by investing in both Dogness International and Legacy Housing 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 Dogness International and Legacy Housing into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Dogness International Corp and Legacy Housing Corp, you can compare the effects of market volatilities on Dogness International and Legacy Housing 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 Dogness International with a short position of Legacy Housing. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dogness International and Legacy Housing.

Diversification Opportunities for Dogness International and Legacy Housing

-0.37

Correlation Coefficient

Dogness International  Legacy Housing

Very good diversification

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

Pair Corralation between Dogness International and Legacy Housing

Given the investment horizon of 90 days Dogness International Corp is expected to generate 6.68 times more return on investment than Legacy Housing. However, Dogness International is 6.68 times more volatile than Legacy Housing Corp. It trades about 0.01 of its potential returns per unit of risk. Legacy Housing Corp is currently generating about 0.03 per unit of risk. If you would invest  4,483  in Dogness International Corp on December 28, 2024 and sell it today you would lose (1,768) from holding Dogness International Corp or give up 39.44% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Dogness International Corp  vs.  Legacy Housing Corp

Dogness International

Risk-Adjusted Performance

Very Weak

Over the last 90 days Dogness International Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical and fundamental indicators, Dogness International is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Legacy Housing Corp

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Legacy Housing Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong technical and fundamental indicators, Legacy Housing is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Dogness International and Legacy Housing

The main advantage of trading using opposite Dogness International and Legacy Housing positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dogness International position performs unexpectedly, Legacy Housing 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 Legacy Housing will offset losses from the drop in Legacy Housing's long position.

The idea behind Dogness International Corp and Legacy Housing Corp 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.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.