Correlation Between Leggett Platt and Penta Ocean

Can any of the company-specific risk be diversified away by investing in both Leggett Platt and Penta Ocean 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 Penta Ocean 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 Penta Ocean Construction Co, you can compare the effects of market volatilities on Leggett Platt and Penta Ocean 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 Penta Ocean. Check out your portfolio center. Please also check ongoing floating volatility patterns of Leggett Platt and Penta Ocean.

Diversification Opportunities for Leggett Platt and Penta Ocean

-0.75

Correlation Coefficient

Leggett Platt  Penta Ocean

Pay attention - limited upside

The 3 months correlation between Leggett and Penta is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Leggett Platt Incorporated and Penta Ocean Construction Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Penta Ocean Construc 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 Penta Ocean. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Penta Ocean Construc has no effect on the direction of Leggett Platt i.e., Leggett Platt and Penta Ocean go up and down completely randomly.

Pair Corralation between Leggett Platt and Penta Ocean

Assuming the 90 days horizon Leggett Platt Incorporated is expected to under-perform the Penta Ocean. In addition to that, Leggett Platt is 1.5 times more volatile than Penta Ocean Construction Co. It trades about -0.07 of its total potential returns per unit of risk. Penta Ocean Construction Co is currently generating about 0.13 per unit of volatility. If you would invest  380.00  in Penta Ocean Construction Co on December 23, 2024 and sell it today you would earn a total of  66.00  from holding Penta Ocean Construction Co or generate 17.37% return on investment over 90 days.

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

Leggett Platt Incorporated  vs.  Penta Ocean Construction Co

Leggett Platt

Risk-Adjusted Performance

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 fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Penta Ocean Construc

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Penta Ocean Construction Co are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Penta Ocean reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Leggett Platt and Penta Ocean

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

The idea behind Leggett Platt Incorporated and Penta Ocean Construction Co 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.