Correlation Between Premium Catering and LegalZoom

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

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

Diversification Opportunities for Premium Catering and LegalZoom

-0.81

Correlation Coefficient

Premium Catering  LegalZoom

Pay attention - limited upside

The 3 months correlation between Premium and LegalZoom is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding Premium Catering Limited and LegalZoom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LegalZoom and Premium Catering 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 Premium Catering Limited are associated (or correlated) with LegalZoom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LegalZoom has no effect on the direction of Premium Catering i.e., Premium Catering and LegalZoom go up and down completely randomly.

Pair Corralation between Premium Catering and LegalZoom

Allowing for the 90-day total investment horizon Premium Catering Limited is expected to under-perform the LegalZoom. In addition to that, Premium Catering is 3.65 times more volatile than LegalZoom. It trades about -0.11 of its total potential returns per unit of risk. LegalZoom is currently generating about -0.02 per unit of volatility. If you would invest  1,085  in LegalZoom on October 6, 2024 and sell it today you would lose (312.00) from holding LegalZoom or give up 28.76% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	28.23%
Values	Daily Returns

Premium Catering Limited  vs.  LegalZoom

Premium Catering

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Premium Catering Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's 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.

LegalZoom

Risk-Adjusted Performance

8 of 100

OK

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

Pair Trading with Premium Catering and LegalZoom

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

The idea behind Premium Catering Limited and LegalZoom 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.