Correlation Between Legal General and New Residential
Can any of the company-specific risk be diversified away by investing in both Legal General and New Residential 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 Legal General and New Residential into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Legal General Group and New Residential Investment, you can compare the effects of market volatilities on Legal General and New Residential 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 Legal General with a short position of New Residential. Check out your portfolio center. Please also check ongoing floating volatility patterns of Legal General and New Residential.
Diversification Opportunities for Legal General and New Residential
0.39 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Legal and New is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Legal General Group and New Residential Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Residential Inve and Legal General 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 Legal General Group are associated (or correlated) with New Residential. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Residential Inve has no effect on the direction of Legal General i.e., Legal General and New Residential go up and down completely randomly.
Pair Corralation between Legal General and New Residential
Assuming the 90 days trading horizon Legal General Group is expected to generate 1.84 times more return on investment than New Residential. However, Legal General is 1.84 times more volatile than New Residential Investment. It trades about 0.22 of its potential returns per unit of risk. New Residential Investment is currently generating about 0.21 per unit of risk. If you would invest 21,560 in Legal General Group on September 14, 2024 and sell it today you would earn a total of 1,640 from holding Legal General Group or generate 7.61% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Legal General Group vs. New Residential Investment
Performance |
| Timeline |
| Legal General Group |
| New Residential Inve |
Legal General and New Residential Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Legal General and New Residential
The main advantage of trading using opposite Legal General and New Residential positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Legal General position performs unexpectedly, New Residential 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 New Residential will offset losses from the drop in New Residential's long position.| Legal General vs. Inspiration Healthcare Group | Legal General vs. Target Healthcare REIT | Legal General vs. Cardinal Health | Legal General vs. Abingdon Health Plc |
| New Residential vs. Zoom Video Communications | New Residential vs. Spirent Communications plc | New Residential vs. Aeorema Communications Plc | New Residential vs. Alior Bank SA |
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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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