Correlation Between Spanish Broadcasting and Legible

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

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

Diversification Opportunities for Spanish Broadcasting and Legible

-0.32

Correlation Coefficient

Spanish Broadcasting  Legible

Very good diversification

The 3 months correlation between Spanish and Legible is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Spanish Broadcasting System and Legible in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Legible and Spanish Broadcasting 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 Spanish Broadcasting System are associated (or correlated) with Legible. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Legible has no effect on the direction of Spanish Broadcasting i.e., Spanish Broadcasting and Legible go up and down completely randomly.

Pair Corralation between Spanish Broadcasting and Legible

Assuming the 90 days horizon Spanish Broadcasting System is expected to under-perform the Legible. In addition to that, Spanish Broadcasting is 1.07 times more volatile than Legible. It trades about -0.02 of its total potential returns per unit of risk. Legible is currently generating about 0.03 per unit of volatility. If you would invest  7.59  in Legible on October 7, 2024 and sell it today you would lose (4.59) from holding Legible or give up 60.47% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	3.61%
Values	Daily Returns

Spanish Broadcasting System  vs.  Legible

Spanish Broadcasting

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Spanish Broadcasting System has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Spanish Broadcasting is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Legible

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Legible has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Spanish Broadcasting and Legible

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

The idea behind Spanish Broadcasting System and Legible 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .