Correlation Between Lamb Weston and Legacy Education

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

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

Diversification Opportunities for Lamb Weston and Legacy Education

-0.36

Correlation Coefficient

Lamb Weston  Legacy Education

Very good diversification

The 3 months correlation between Lamb and Legacy is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Lamb Weston Holdings and Legacy Education in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Legacy Education and Lamb Weston 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 Lamb Weston Holdings are associated (or correlated) with Legacy Education. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Legacy Education has no effect on the direction of Lamb Weston i.e., Lamb Weston and Legacy Education go up and down completely randomly.

Pair Corralation between Lamb Weston and Legacy Education

Allowing for the 90-day total investment horizon Lamb Weston Holdings is expected to under-perform the Legacy Education. But the stock apears to be less risky and, when comparing its historical volatility, Lamb Weston Holdings is 1.45 times less risky than Legacy Education. The stock trades about -0.17 of its potential returns per unit of risk. The Legacy Education is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  821.00  in Legacy Education on November 28, 2024 and sell it today you would lose (71.00) from holding Legacy Education or give up 8.65% of portfolio value over 90 days.

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

Lamb Weston Holdings  vs.  Legacy Education

Lamb Weston Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Lamb Weston Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in March 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

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 fairly strong fundamental indicators, Legacy Education is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Lamb Weston and Legacy Education

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

The idea behind Lamb Weston Holdings and Legacy Education 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 Channel module to use Commodity Channel Index to analyze current equity momentum.