Correlation Between Legend Power and Supremex

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

By analyzing existing cross correlation between Legend Power Systems and Supremex, you can compare the effects of market volatilities on Legend Power and Supremex 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 Legend Power with a short position of Supremex. Check out your portfolio center. Please also check ongoing floating volatility patterns of Legend Power and Supremex.

Diversification Opportunities for Legend Power and Supremex

0.56

Correlation Coefficient

Legend Power  Supremex

Very weak diversification

The 3 months correlation between Legend and Supremex is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Legend Power Systems and Supremex in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Supremex and Legend Power 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 Legend Power Systems are associated (or correlated) with Supremex. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Supremex has no effect on the direction of Legend Power i.e., Legend Power and Supremex go up and down completely randomly.

Pair Corralation between Legend Power and Supremex

Assuming the 90 days horizon Legend Power Systems is expected to generate 4.07 times more return on investment than Supremex. However, Legend Power is 4.07 times more volatile than Supremex. It trades about -0.03 of its potential returns per unit of risk. Supremex is currently generating about -0.15 per unit of risk. If you would invest  21.00  in Legend Power Systems on October 8, 2024 and sell it today you would lose (1.00) from holding Legend Power Systems or give up 4.76% of portfolio value over 90 days.

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

Legend Power Systems  vs.  Supremex

Legend Power Systems

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Legend Power Systems 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 Stock's basic indicators remain fairly stable which may send shares a bit higher in February 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Supremex

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Supremex has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Legend Power and Supremex

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

The idea behind Legend Power Systems and Supremex 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 Commodity Directory module to find actively traded commodities issued by global exchanges.