Correlation Between LG Russell and Legal General
Can any of the company-specific risk be diversified away by investing in both LG Russell 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 LG Russell and Legal General into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LG Russell 2000 and Legal General UCITS, you can compare the effects of market volatilities on LG Russell 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 LG Russell with a short position of Legal General. Check out your portfolio center. Please also check ongoing floating volatility patterns of LG Russell and Legal General.
Diversification Opportunities for LG Russell and Legal General
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between RTWO and Legal is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding LG Russell 2000 and Legal General UCITS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Legal General UCITS and LG Russell 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 LG Russell 2000 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 UCITS has no effect on the direction of LG Russell i.e., LG Russell and Legal General go up and down completely randomly.
Pair Corralation between LG Russell and Legal General
Assuming the 90 days trading horizon LG Russell 2000 is expected to under-perform the Legal General. In addition to that, LG Russell is 1.36 times more volatile than Legal General UCITS. It trades about -0.02 of its total potential returns per unit of risk. Legal General UCITS is currently generating about 0.15 per unit of volatility. If you would invest 1,583 in Legal General UCITS on September 14, 2024 and sell it today you would earn a total of 44.00 from holding Legal General UCITS or generate 2.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
LG Russell 2000 vs. Legal General UCITS
Performance |
| Timeline |
| LG Russell 2000 |
| Legal General UCITS |
LG Russell and Legal General Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LG Russell and Legal General
The main advantage of trading using opposite LG Russell and Legal General positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LG Russell 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.| LG Russell vs. SPDR Dow Jones | LG Russell vs. iShares Core MSCI | LG Russell vs. iShares SP 500 | LG Russell vs. iShares Core MSCI |
| Legal General vs. SPDR Dow Jones | Legal General vs. iShares Core MSCI | Legal General vs. iShares SP 500 | Legal General vs. iShares Core MSCI |
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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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