Correlation Between Legacy Education and Pacific Gas

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

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

Diversification Opportunities for Legacy Education and Pacific Gas

-0.09

Correlation Coefficient

Legacy Education  Pacific Gas

Good diversification

The 3 months correlation between Legacy and Pacific is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Legacy Education and Pacific Gas Electric in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pacific Gas Electric 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 Pacific Gas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pacific Gas Electric has no effect on the direction of Legacy Education i.e., Legacy Education and Pacific Gas go up and down completely randomly.

Pair Corralation between Legacy Education and Pacific Gas

Given the investment horizon of 90 days Legacy Education is expected to under-perform the Pacific Gas. In addition to that, Legacy Education is 1.39 times more volatile than Pacific Gas Electric. It trades about -0.1 of its total potential returns per unit of risk. Pacific Gas Electric is currently generating about -0.11 per unit of volatility. If you would invest  1,978  in Pacific Gas Electric on October 17, 2024 and sell it today you would lose (146.00) from holding Pacific Gas Electric or give up 7.38% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	73.68%
Values	Daily Returns

Legacy Education  vs.  Pacific Gas Electric

Legacy Education

Risk-Adjusted Performance

8 of 100

OK

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

Pacific Gas Electric

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pacific Gas Electric 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 Preferred Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Legacy Education and Pacific Gas

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

The idea behind Legacy Education and Pacific Gas Electric 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.