Correlation Between Legal General and North American
Can any of the company-specific risk be diversified away by investing in both Legal General and North American 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 North American 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 North American Financial, you can compare the effects of market volatilities on Legal General and North American 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 North American. Check out your portfolio center. Please also check ongoing floating volatility patterns of Legal General and North American.
Diversification Opportunities for Legal General and North American
-0.52 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Legal and North is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Legal General Group and North American Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on North American Financial 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 North American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of North American Financial has no effect on the direction of Legal General i.e., Legal General and North American go up and down completely randomly.
Pair Corralation between Legal General and North American
Assuming the 90 days horizon Legal General Group is expected to under-perform the North American. But the pink sheet apears to be less risky and, when comparing its historical volatility, Legal General Group is 2.21 times less risky than North American. The pink sheet trades about -0.19 of its potential returns per unit of risk. The North American Financial is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 469.00 in North American Financial on August 24, 2024 and sell it today you would earn a total of 39.00 from holding North American Financial or generate 8.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Legal General Group vs. North American Financial
Performance |
| Timeline |
| Legal General Group |
| North American Financial |
Legal General and North American Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Legal General and North American
The main advantage of trading using opposite Legal General and North American positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Legal General position performs unexpectedly, North American 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 North American will offset losses from the drop in North American's long position.| Legal General vs. Minerals Technologies | Legal General vs. NETGEAR | Legal General vs. Skechers USA | Legal General vs. Arrow Electronics |
| North American vs. Financial 15 Split | North American vs. Clough Global Ef | North American vs. Morgan Stanley India | North American vs. SEI Investments |
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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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