Correlation Between Legacy Education and BANDAI NAMCO

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

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

Diversification Opportunities for Legacy Education and BANDAI NAMCO

-0.69

Correlation Coefficient

Legacy Education  BANDAI NAMCO

Excellent diversification

The 3 months correlation between Legacy and BANDAI is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Legacy Education and BANDAI NAMCO Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BANDAI NAMCO Holdings 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 BANDAI NAMCO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BANDAI NAMCO Holdings has no effect on the direction of Legacy Education i.e., Legacy Education and BANDAI NAMCO go up and down completely randomly.

Pair Corralation between Legacy Education and BANDAI NAMCO

Given the investment horizon of 90 days Legacy Education is expected to under-perform the BANDAI NAMCO. In addition to that, Legacy Education is 1.12 times more volatile than BANDAI NAMCO Holdings. It trades about -0.03 of its total potential returns per unit of risk. BANDAI NAMCO Holdings is currently generating about 0.22 per unit of volatility. If you would invest  2,120  in BANDAI NAMCO Holdings on December 28, 2024 and sell it today you would earn a total of  1,338  from holding BANDAI NAMCO Holdings or generate 63.11% return on investment over 90 days.

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

Legacy Education  vs.  BANDAI NAMCO Holdings

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 latest unfluctuating performance, the Stock's fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

BANDAI NAMCO Holdings

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in BANDAI NAMCO Holdings are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak fundamental indicators, BANDAI NAMCO reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Legacy Education and BANDAI NAMCO

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

The idea behind Legacy Education and BANDAI NAMCO Holdings 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.