Correlation Between LEGAL GENERAL and ScanSource
Can any of the company-specific risk be diversified away by investing in both LEGAL GENERAL and ScanSource 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 ScanSource into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LEGAL GENERAL and ScanSource, you can compare the effects of market volatilities on LEGAL GENERAL and ScanSource 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 ScanSource. Check out your portfolio center. Please also check ongoing floating volatility patterns of LEGAL GENERAL and ScanSource.
Diversification Opportunities for LEGAL GENERAL and ScanSource
0.31 | Correlation Coefficient |
Weak diversification
The 3 months correlation between LEGAL and ScanSource is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding LEGAL GENERAL and ScanSource in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ScanSource 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 are associated (or correlated) with ScanSource. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ScanSource has no effect on the direction of LEGAL GENERAL i.e., LEGAL GENERAL and ScanSource go up and down completely randomly.
Pair Corralation between LEGAL GENERAL and ScanSource
Assuming the 90 days trading horizon LEGAL GENERAL is expected to generate 0.7 times more return on investment than ScanSource. However, LEGAL GENERAL is 1.42 times less risky than ScanSource. It trades about 0.08 of its potential returns per unit of risk. ScanSource is currently generating about 0.06 per unit of risk. If you would invest 262.00 in LEGAL GENERAL on September 22, 2024 and sell it today you would earn a total of 7.00 from holding LEGAL GENERAL or generate 2.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
LEGAL GENERAL vs. ScanSource
Performance |
| Timeline |
| LEGAL GENERAL |
| ScanSource |
LEGAL GENERAL and ScanSource Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LEGAL GENERAL and ScanSource
The main advantage of trading using opposite LEGAL GENERAL and ScanSource positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LEGAL GENERAL position performs unexpectedly, ScanSource 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 ScanSource will offset losses from the drop in ScanSource's long position.| LEGAL GENERAL vs. Apple Inc | LEGAL GENERAL vs. Apple Inc | LEGAL GENERAL vs. Apple Inc | LEGAL GENERAL vs. Apple Inc |
| ScanSource vs. MULTI CHEM LTD | ScanSource vs. LEGAL GENERAL | ScanSource vs. SPORTING | ScanSource vs. US FOODS HOLDING |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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