Correlation Between Legacy Education and Alfen NV

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

By analyzing existing cross correlation between Legacy Education and Alfen NV, you can compare the effects of market volatilities on Legacy Education and Alfen NV 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 Alfen NV. Check out your portfolio center. Please also check ongoing floating volatility patterns of Legacy Education and Alfen NV.

Diversification Opportunities for Legacy Education and Alfen NV

0.24

Correlation Coefficient

Legacy Education  Alfen NV

Modest diversification

The 3 months correlation between Legacy and Alfen is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Legacy Education and Alfen NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alfen NV 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 Alfen NV. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alfen NV has no effect on the direction of Legacy Education i.e., Legacy Education and Alfen NV go up and down completely randomly.

Pair Corralation between Legacy Education and Alfen NV

Given the investment horizon of 90 days Legacy Education is expected to generate 1.85 times more return on investment than Alfen NV. However, Legacy Education is 1.85 times more volatile than Alfen NV. It trades about 0.33 of its potential returns per unit of risk. Alfen NV is currently generating about -0.18 per unit of risk. If you would invest  402.00  in Legacy Education on August 31, 2024 and sell it today you would earn a total of  408.00  from holding Legacy Education or generate 101.49% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	73.02%
Values	Daily Returns

Legacy Education  vs.  Alfen NV

Legacy Education

Risk-Adjusted Performance

25 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Legacy Education are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain fundamental indicators, Legacy Education showed solid returns over the last few months and may actually be approaching a breakup point.

Alfen NV

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alfen NV has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's fundamental drivers remain fairly strong which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Legacy Education and Alfen NV

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

The idea behind Legacy Education and Alfen NV 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.