Correlation Between Legal General and United Guardian
Can any of the company-specific risk be diversified away by investing in both Legal General and United Guardian 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 United Guardian 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 United Guardian, you can compare the effects of market volatilities on Legal General and United Guardian 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 United Guardian. Check out your portfolio center. Please also check ongoing floating volatility patterns of Legal General and United Guardian.
Diversification Opportunities for Legal General and United Guardian
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Legal and United is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Legal General Group and United Guardian in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Guardian 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 United Guardian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Guardian has no effect on the direction of Legal General i.e., Legal General and United Guardian go up and down completely randomly.
Pair Corralation between Legal General and United Guardian
Assuming the 90 days horizon Legal General Group is expected to generate 0.7 times more return on investment than United Guardian. However, Legal General Group is 1.44 times less risky than United Guardian. It trades about 0.12 of its potential returns per unit of risk. United Guardian is currently generating about -0.11 per unit of risk. If you would invest 1,432 in Legal General Group on September 12, 2024 and sell it today you would earn a total of 57.00 from holding Legal General Group or generate 3.98% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Legal General Group vs. United Guardian
Performance |
| Timeline |
| Legal General Group |
| United Guardian |
Legal General and United Guardian Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Legal General and United Guardian
The main advantage of trading using opposite Legal General and United Guardian positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Legal General position performs unexpectedly, United Guardian 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 United Guardian will offset losses from the drop in United Guardian's long position.| Legal General vs. Nuveen Global High | Legal General vs. New America High | Legal General vs. Brookfield Business Corp | Legal General vs. Elysee Development Corp |
| United Guardian vs. Victory Integrity Smallmid Cap | United Guardian vs. Hilton Worldwide Holdings | United Guardian vs. NVIDIA | United Guardian vs. JPMorgan Chase Co |
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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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