Correlation Between Legacy Education and Catalyst Metals

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

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

Diversification Opportunities for Legacy Education and Catalyst Metals

-0.82

Correlation Coefficient

Legacy Education  Catalyst Metals

Pay attention - limited upside

The 3 months correlation between Legacy and Catalyst is -0.82. Overlapping area represents the amount of risk that can be diversified away by holding Legacy Education and Catalyst Metals Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Catalyst Metals 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 Catalyst Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Catalyst Metals has no effect on the direction of Legacy Education i.e., Legacy Education and Catalyst Metals go up and down completely randomly.

Pair Corralation between Legacy Education and Catalyst Metals

Given the investment horizon of 90 days Legacy Education is expected to generate 1.26 times more return on investment than Catalyst Metals. However, Legacy Education is 1.26 times more volatile than Catalyst Metals Limited. It trades about 0.07 of its potential returns per unit of risk. Catalyst Metals Limited is currently generating about -0.06 per unit of risk. If you would invest  795.00  in Legacy Education on October 11, 2024 and sell it today you would earn a total of  40.00  from holding Legacy Education or generate 5.03% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	95.24%
Values	Daily Returns

Legacy Education  vs.  Catalyst Metals Limited

Legacy Education

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Legacy Education are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile fundamental indicators, Legacy Education showed solid returns over the last few months and may actually be approaching a breakup point.

Catalyst Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Catalyst Metals Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's primary indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Legacy Education and Catalyst Metals

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

The idea behind Legacy Education and Catalyst Metals 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.

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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.