Correlation Between Rocky Brands and Legacy Education

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

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

Diversification Opportunities for Rocky Brands and Legacy Education

-0.27

Correlation Coefficient

Rocky Brands  Legacy Education

Very good diversification

The 3 months correlation between Rocky and Legacy is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Rocky Brands and Legacy Education in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Legacy Education and Rocky Brands 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 Rocky Brands 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 Rocky Brands i.e., Rocky Brands and Legacy Education go up and down completely randomly.

Pair Corralation between Rocky Brands and Legacy Education

Given the investment horizon of 90 days Rocky Brands is expected to generate 0.46 times more return on investment than Legacy Education. However, Rocky Brands is 2.17 times less risky than Legacy Education. It trades about 0.24 of its potential returns per unit of risk. Legacy Education is currently generating about 0.02 per unit of risk. If you would invest  2,278  in Rocky Brands on October 25, 2024 and sell it today you would earn a total of  216.00  from holding Rocky Brands or generate 9.48% return on investment over 90 days.

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

Rocky Brands  vs.  Legacy Education

Rocky Brands

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rocky Brands has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong forward-looking signals, Rocky Brands is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Legacy Education

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Legacy Education are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak fundamental indicators, Legacy Education showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Rocky Brands and Legacy Education

The main advantage of trading using opposite Rocky Brands and Legacy Education positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rocky Brands 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 Rocky Brands 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.