Correlation Between Legible and Sylvania Platinum

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

By analyzing existing cross correlation between Legible and Sylvania Platinum Limited, you can compare the effects of market volatilities on Legible and Sylvania Platinum 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 Legible with a short position of Sylvania Platinum. Check out your portfolio center. Please also check ongoing floating volatility patterns of Legible and Sylvania Platinum.

Diversification Opportunities for Legible and Sylvania Platinum

0.83

Correlation Coefficient

Legible  Sylvania Platinum

Very poor diversification

The 3 months correlation between Legible and Sylvania is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Legible and Sylvania Platinum Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sylvania Platinum and Legible 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 Legible are associated (or correlated) with Sylvania Platinum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sylvania Platinum has no effect on the direction of Legible i.e., Legible and Sylvania Platinum go up and down completely randomly.

Pair Corralation between Legible and Sylvania Platinum

Assuming the 90 days horizon Legible is expected to generate 1.79 times more return on investment than Sylvania Platinum. However, Legible is 1.79 times more volatile than Sylvania Platinum Limited. It trades about 0.03 of its potential returns per unit of risk. Sylvania Platinum Limited is currently generating about -0.01 per unit of risk. If you would invest  7.59  in Legible on October 7, 2024 and sell it today you would lose (4.59) from holding Legible or give up 60.47% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	74.3%
Values	Daily Returns

Legible  vs.  Sylvania Platinum Limited

Legible

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Legible has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Sylvania Platinum

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sylvania Platinum Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's essential indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Legible and Sylvania Platinum

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

The idea behind Legible and Sylvania Platinum Limited 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.