Correlation Between Legacy Education and European Wax

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

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

Diversification Opportunities for Legacy Education and European Wax

-0.4

Correlation Coefficient

Legacy Education  European Wax

Very good diversification

The 3 months correlation between Legacy and European is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Legacy Education and European Wax Center in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on European Wax Center and Legacy Education 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 Legacy Education are associated (or correlated) with European Wax. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of European Wax Center has no effect on the direction of Legacy Education i.e., Legacy Education and European Wax go up and down completely randomly.

Pair Corralation between Legacy Education and European Wax

Given the investment horizon of 90 days Legacy Education is expected to generate 1.08 times more return on investment than European Wax. However, Legacy Education is 1.08 times more volatile than European Wax Center. It trades about 0.3 of its potential returns per unit of risk. European Wax Center is currently generating about -0.05 per unit of risk. If you would invest  402.00  in Legacy Education on September 14, 2024 and sell it today you would earn a total of  422.00  from holding Legacy Education or generate 104.98% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	87.3%
Values	Daily Returns

Legacy Education  vs.  European Wax Center

Legacy Education

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Legacy Education are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal fundamental indicators, Legacy Education showed solid returns over the last few months and may actually be approaching a breakup point.

European Wax Center

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days European Wax Center has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's fundamental indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Legacy Education and European Wax

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

The idea behind Legacy Education and European Wax Center 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.