Correlation Between Legal General and FC Investment
Can any of the company-specific risk be diversified away by investing in both Legal General and FC Investment 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 FC Investment 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 FC Investment Trust, you can compare the effects of market volatilities on Legal General and FC Investment 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 FC Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Legal General and FC Investment.
Diversification Opportunities for Legal General and FC Investment
-0.62 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Legal and FCIT is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Legal General Group and FC Investment Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FC Investment Trust 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 FC Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FC Investment Trust has no effect on the direction of Legal General i.e., Legal General and FC Investment go up and down completely randomly.
Pair Corralation between Legal General and FC Investment
Assuming the 90 days trading horizon Legal General is expected to generate 10.92 times less return on investment than FC Investment. In addition to that, Legal General is 1.21 times more volatile than FC Investment Trust. It trades about 0.03 of its total potential returns per unit of risk. FC Investment Trust is currently generating about 0.34 per unit of volatility. If you would invest 105,600 in FC Investment Trust on August 28, 2024 and sell it today you would earn a total of 6,400 from holding FC Investment Trust or generate 6.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Legal General Group vs. FC Investment Trust
Performance |
| Timeline |
| Legal General Group |
| FC Investment Trust |
Legal General and FC Investment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Legal General and FC Investment
The main advantage of trading using opposite Legal General and FC Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Legal General position performs unexpectedly, FC Investment 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 FC Investment will offset losses from the drop in FC Investment's long position.| Legal General vs. Planet Fitness Cl | Legal General vs. Orient Telecoms | Legal General vs. Universal Display Corp | Legal General vs. Zegona Communications Plc |
| FC Investment vs. Catalyst Media Group | FC Investment vs. Oncimmune Holdings plc | FC Investment vs. Invesco Health Care | FC Investment vs. Coor Service Management |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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