Correlation Between Ufp Industries and Leggett Platt

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

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

Diversification Opportunities for Ufp Industries and Leggett Platt

-0.12

Correlation Coefficient

Ufp Industries  Leggett Platt

Good diversification

The 3 months correlation between Ufp and Leggett is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Ufp Industries and Leggett Platt Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Leggett Platt rporated and Ufp Industries 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 Ufp Industries 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 rporated has no effect on the direction of Ufp Industries i.e., Ufp Industries and Leggett Platt go up and down completely randomly.

Pair Corralation between Ufp Industries and Leggett Platt

Given the investment horizon of 90 days Ufp Industries is expected to generate 0.86 times more return on investment than Leggett Platt. However, Ufp Industries is 1.17 times less risky than Leggett Platt. It trades about 0.02 of its potential returns per unit of risk. Leggett Platt Incorporated is currently generating about -0.13 per unit of risk. If you would invest  11,300  in Ufp Industries on January 29, 2024 and sell it today you would earn a total of  64.00  from holding Ufp Industries or generate 0.57% return on investment over 90 days.

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

Ufp Industries  vs.  Leggett Platt Incorporated

Ufp Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ufp Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Ufp Industries is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Leggett Platt rporated

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 unsteady performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in May 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Ufp Industries and Leggett Platt

The main advantage of trading using opposite Ufp Industries and Leggett Platt positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ufp Industries 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 Ufp Industries 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.