Correlation Between Willis Lease and Leggett Platt

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

By analyzing existing cross correlation between Willis Lease Finance and Leggett Platt Incorporated, you can compare the effects of market volatilities on Willis Lease and Leggett Platt 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 Willis Lease with a short position of Leggett Platt. Check out your portfolio center. Please also check ongoing floating volatility patterns of Willis Lease and Leggett Platt.

Diversification Opportunities for Willis Lease and Leggett Platt

-0.89

Correlation Coefficient

Willis Lease  Leggett Platt

Pay attention - limited upside

The 3 months correlation between Willis and Leggett is -0.89. Overlapping area represents the amount of risk that can be diversified away by holding Willis Lease Finance and Leggett Platt Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Leggett Platt and Willis Lease 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 Willis Lease Finance are associated (or correlated) with Leggett Platt. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Leggett Platt has no effect on the direction of Willis Lease i.e., Willis Lease and Leggett Platt go up and down completely randomly.

Pair Corralation between Willis Lease and Leggett Platt

Given the investment horizon of 90 days Willis Lease Finance is expected to generate 0.42 times more return on investment than Leggett Platt. However, Willis Lease Finance is 2.36 times less risky than Leggett Platt. It trades about 0.58 of its potential returns per unit of risk. Leggett Platt Incorporated is currently generating about -0.3 per unit of risk. If you would invest  4,898  in Willis Lease Finance on February 21, 2024 and sell it today you would earn a total of  1,713  from holding Willis Lease Finance or generate 34.97% return on investment over 90 days.

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

Willis Lease Finance  vs.  Leggett Platt Incorporated

Willis Lease Finance

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Willis Lease Finance are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak technical and fundamental indicators, Willis Lease exhibited solid returns over the last few months and may actually be approaching a breakup point.

Leggett Platt

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Leggett Platt Incorporated has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in June 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Willis Lease and Leggett Platt

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

The idea behind Willis Lease Finance and Leggett Platt Incorporated 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.