Correlation Between Leggett Platt and SERI INDUSTRIAL

Can any of the company-specific risk be diversified away by investing in both Leggett Platt and SERI INDUSTRIAL 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 Leggett Platt and SERI INDUSTRIAL into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Leggett Platt Incorporated and SERI INDUSTRIAL EO, you can compare the effects of market volatilities on Leggett Platt and SERI INDUSTRIAL 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 Leggett Platt with a short position of SERI INDUSTRIAL. Check out your portfolio center. Please also check ongoing floating volatility patterns of Leggett Platt and SERI INDUSTRIAL.

Diversification Opportunities for Leggett Platt and SERI INDUSTRIAL

0.1

Correlation Coefficient

Leggett Platt  SERI INDUSTRIAL

Average diversification

The 3 months correlation between Leggett and SERI is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Leggett Platt Incorporated and SERI INDUSTRIAL EO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SERI INDUSTRIAL EO and Leggett Platt 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 Leggett Platt Incorporated are associated (or correlated) with SERI INDUSTRIAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SERI INDUSTRIAL EO has no effect on the direction of Leggett Platt i.e., Leggett Platt and SERI INDUSTRIAL go up and down completely randomly.

Pair Corralation between Leggett Platt and SERI INDUSTRIAL

Assuming the 90 days horizon Leggett Platt Incorporated is expected to under-perform the SERI INDUSTRIAL. But the stock apears to be less risky and, when comparing its historical volatility, Leggett Platt Incorporated is 1.56 times less risky than SERI INDUSTRIAL. The stock trades about -0.01 of its potential returns per unit of risk. The SERI INDUSTRIAL EO is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  262.00  in SERI INDUSTRIAL EO on September 17, 2024 and sell it today you would earn a total of  9.00  from holding SERI INDUSTRIAL EO or generate 3.44% return on investment over 90 days.

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

Leggett Platt Incorporated  vs.  SERI INDUSTRIAL EO

Leggett Platt

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Leggett Platt Incorporated has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Leggett Platt is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

SERI INDUSTRIAL EO

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SERI INDUSTRIAL EO has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's technical indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Leggett Platt and SERI INDUSTRIAL

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

The idea behind Leggett Platt Incorporated and SERI INDUSTRIAL EO 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..