Correlation Between LegalZoom and Fuel Tech

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

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

Diversification Opportunities for LegalZoom and Fuel Tech

-0.14

Correlation Coefficient

LegalZoom  Fuel Tech

Good diversification

The 3 months correlation between LegalZoom and Fuel is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding LegalZoom and Fuel Tech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fuel Tech and LegalZoom 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 LegalZoom are associated (or correlated) with Fuel Tech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fuel Tech has no effect on the direction of LegalZoom i.e., LegalZoom and Fuel Tech go up and down completely randomly.

Pair Corralation between LegalZoom and Fuel Tech

Allowing for the 90-day total investment horizon LegalZoom is expected to generate 1.04 times more return on investment than Fuel Tech. However, LegalZoom is 1.04 times more volatile than Fuel Tech. It trades about 0.02 of its potential returns per unit of risk. Fuel Tech is currently generating about -0.01 per unit of risk. If you would invest  788.00  in LegalZoom on January 11, 2025 and sell it today you would earn a total of  3.00  from holding LegalZoom or generate 0.38% return on investment over 90 days.

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

LegalZoom  vs.  Fuel Tech

LegalZoom

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in LegalZoom are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, LegalZoom is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Fuel Tech

Risk-Adjusted Performance

Very Weak

Over the last 90 days Fuel Tech has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent technical and fundamental indicators, Fuel Tech is not utilizing all of its potentials. The newest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with LegalZoom and Fuel Tech

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

The idea behind LegalZoom and Fuel Tech 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.

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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.