Correlation Between Leggett Platt and Willis Lease
Can any of the company-specific risk be diversified away by investing in both Leggett Platt and Willis Lease 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 Leggett Platt and Willis Lease into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Leggett Platt Incorporated and Willis Lease Finance, you can compare the effects of market volatilities on Leggett Platt and Willis Lease 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 Leggett Platt with a short position of Willis Lease. Check out your portfolio center. Please also check ongoing floating volatility patterns of Leggett Platt and Willis Lease.
Diversification Opportunities for Leggett Platt and Willis Lease
-0.85 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Leggett and Willis is -0.85. Overlapping area represents the amount of risk that can be diversified away by holding Leggett Platt Incorporated and Willis Lease Finance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Willis Lease Finance and Leggett Platt 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 Leggett Platt Incorporated are associated (or correlated) with Willis Lease. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Willis Lease Finance has no effect on the direction of Leggett Platt i.e., Leggett Platt and Willis Lease go up and down completely randomly.
Pair Corralation between Leggett Platt and Willis Lease
Considering the 90-day investment horizon Leggett Platt Incorporated is expected to under-perform the Willis Lease. In addition to that, Leggett Platt is 1.25 times more volatile than Willis Lease Finance. It trades about -0.13 of its total potential returns per unit of risk. Willis Lease Finance is currently generating about 0.09 per unit of volatility. If you would invest 4,272 in Willis Lease Finance on February 16, 2024 and sell it today you would earn a total of 2,145 from holding Willis Lease Finance or generate 50.21% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Leggett Platt Incorporated vs. Willis Lease Finance
Performance |
Timeline |
Leggett Platt |
Willis Lease Finance |
Leggett Platt and Willis Lease Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Leggett Platt and Willis Lease
The main advantage of trading using opposite Leggett Platt and Willis Lease positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Leggett Platt position performs unexpectedly, Willis Lease 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 Willis Lease will offset losses from the drop in Willis Lease's long position.Leggett Platt vs. Willis Lease Finance | Leggett Platt vs. Rocky Brands | Leggett Platt vs. First Business Financial |
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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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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