Correlation Between Legal General and Intermediate Capital
Can any of the company-specific risk be diversified away by investing in both Legal General and Intermediate Capital 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 Intermediate Capital 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 Intermediate Capital Group, you can compare the effects of market volatilities on Legal General and Intermediate Capital 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 Intermediate Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Legal General and Intermediate Capital.
Diversification Opportunities for Legal General and Intermediate Capital
0.34 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Legal and Intermediate is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Legal General Group and Intermediate Capital Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Intermediate Capital 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 Intermediate Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Intermediate Capital has no effect on the direction of Legal General i.e., Legal General and Intermediate Capital go up and down completely randomly.
Pair Corralation between Legal General and Intermediate Capital
Assuming the 90 days trading horizon Legal General Group is expected to generate 0.42 times more return on investment than Intermediate Capital. However, Legal General Group is 2.38 times less risky than Intermediate Capital. It trades about 0.03 of its potential returns per unit of risk. Intermediate Capital Group is currently generating about -0.01 per unit of risk. If you would invest 22,210 in Legal General Group on August 28, 2024 and sell it today you would earn a total of 100.00 from holding Legal General Group or generate 0.45% 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. Intermediate Capital Group
Performance |
| Timeline |
| Legal General Group |
| Intermediate Capital |
Legal General and Intermediate Capital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Legal General and Intermediate Capital
The main advantage of trading using opposite Legal General and Intermediate Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Legal General position performs unexpectedly, Intermediate Capital 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 Intermediate Capital will offset losses from the drop in Intermediate Capital'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 |
| Intermediate Capital vs. Sovereign Metals | Intermediate Capital vs. Fulcrum Metals PLC | Intermediate Capital vs. Panther Metals PLC | Intermediate Capital vs. AMG Advanced Metallurgical |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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