Correlation Between Legacy Education and ANTA Sports

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

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

Diversification Opportunities for Legacy Education and ANTA Sports

-0.59

Correlation Coefficient

Legacy Education  ANTA Sports

Excellent diversification

The 3 months correlation between Legacy and ANTA is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Legacy Education and ANTA Sports Products in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ANTA Sports Products 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 ANTA Sports. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ANTA Sports Products has no effect on the direction of Legacy Education i.e., Legacy Education and ANTA Sports go up and down completely randomly.

Pair Corralation between Legacy Education and ANTA Sports

Given the investment horizon of 90 days Legacy Education is expected to under-perform the ANTA Sports. In addition to that, Legacy Education is 2.07 times more volatile than ANTA Sports Products. It trades about -0.02 of its total potential returns per unit of risk. ANTA Sports Products is currently generating about 0.11 per unit of volatility. If you would invest  24,995  in ANTA Sports Products on December 28, 2024 and sell it today you would earn a total of  3,548  from holding ANTA Sports Products or generate 14.19% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.36%
Values	Daily Returns

Legacy Education  vs.  ANTA Sports Products

Legacy Education

Risk-Adjusted Performance

Very Weak

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 latest stock price disturbance, may contribute to short-term losses for the investors.

ANTA Sports Products

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ANTA Sports Products are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak fundamental indicators, ANTA Sports showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Legacy Education and ANTA Sports

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

The idea behind Legacy Education and ANTA Sports Products 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.