Correlation Between Bank Negara and Legal General
Can any of the company-specific risk be diversified away by investing in both Bank Negara and Legal General 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 Bank Negara and Legal General into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bank Negara Indonesia and Legal General Group, you can compare the effects of market volatilities on Bank Negara and Legal General 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 Bank Negara with a short position of Legal General. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank Negara and Legal General.
Diversification Opportunities for Bank Negara and Legal General
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Bank and Legal is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Bank Negara Indonesia and Legal General Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Legal General Group and Bank Negara 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 Bank Negara Indonesia are associated (or correlated) with Legal General. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Legal General Group has no effect on the direction of Bank Negara i.e., Bank Negara and Legal General go up and down completely randomly.
Pair Corralation between Bank Negara and Legal General
Assuming the 90 days horizon Bank Negara Indonesia is expected to generate 4.05 times more return on investment than Legal General. However, Bank Negara is 4.05 times more volatile than Legal General Group. It trades about 0.03 of its potential returns per unit of risk. Legal General Group is currently generating about 0.02 per unit of risk. If you would invest 1,401 in Bank Negara Indonesia on August 24, 2024 and sell it today you would earn a total of 275.00 from holding Bank Negara Indonesia or generate 19.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bank Negara Indonesia vs. Legal General Group
Performance |
| Timeline |
| Bank Negara Indonesia |
| Legal General Group |
Bank Negara and Legal General Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank Negara and Legal General
The main advantage of trading using opposite Bank Negara and Legal General positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank Negara position performs unexpectedly, Legal General 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 Legal General will offset losses from the drop in Legal General's long position.| Bank Negara vs. Nedbank Group | Bank Negara vs. Standard Bank Group | Bank Negara vs. Bank Central Asia | Bank Negara vs. PSB Holdings |
| Legal General vs. Minerals Technologies | Legal General vs. NETGEAR | Legal General vs. Skechers USA | Legal General vs. Arrow Electronics |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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