Correlation Between Wayside Technology and Legend Holdings

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

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

Diversification Opportunities for Wayside Technology and Legend Holdings

0.16

Correlation Coefficient

Wayside Technology  Legend Holdings

Average diversification

The 3 months correlation between Wayside and Legend is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Wayside Technology Group and Legend Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Legend Holdings and Wayside Technology 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 Wayside Technology Group are associated (or correlated) with Legend Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Legend Holdings has no effect on the direction of Wayside Technology i.e., Wayside Technology and Legend Holdings go up and down completely randomly.

Pair Corralation between Wayside Technology and Legend Holdings

Assuming the 90 days horizon Wayside Technology Group is expected to generate 0.78 times more return on investment than Legend Holdings. However, Wayside Technology Group is 1.29 times less risky than Legend Holdings. It trades about 0.1 of its potential returns per unit of risk. Legend Holdings is currently generating about 0.03 per unit of risk. If you would invest  3,219  in Wayside Technology Group on October 4, 2024 and sell it today you would earn a total of  8,781  from holding Wayside Technology Group or generate 272.79% return on investment over 90 days.

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

Wayside Technology Group  vs.  Legend Holdings

Wayside Technology

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Wayside Technology Group are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Wayside Technology reported solid returns over the last few months and may actually be approaching a breakup point.

Legend Holdings

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Legend Holdings are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Legend Holdings is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Wayside Technology and Legend Holdings

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

The idea behind Wayside Technology Group and Legend Holdings 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 Global Correlations module to find global opportunities by holding instruments from different markets.