Correlation Between Vanguard and Legal General
Can any of the company-specific risk be diversified away by investing in both Vanguard 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 Vanguard and Legal General into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard SP 500 and Legal General UCITS, you can compare the effects of market volatilities on Vanguard 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 Vanguard with a short position of Legal General. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard and Legal General.
Diversification Opportunities for Vanguard and Legal General
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Vanguard and Legal is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard SP 500 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 Vanguard 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 Vanguard SP 500 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 Vanguard i.e., Vanguard and Legal General go up and down completely randomly.
Pair Corralation between Vanguard and Legal General
Assuming the 90 days trading horizon Vanguard SP 500 is expected to generate 0.64 times more return on investment than Legal General. However, Vanguard SP 500 is 1.56 times less risky than Legal General. It trades about 0.16 of its potential returns per unit of risk. Legal General UCITS is currently generating about -0.03 per unit of risk. If you would invest 9,138 in Vanguard SP 500 on August 30, 2024 and sell it today you would earn a total of 1,687 from holding Vanguard SP 500 or generate 18.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.22% |
| Values | Daily Returns |
Vanguard SP 500 vs. Legal General UCITS
Performance |
| Timeline |
| Vanguard SP 500 |
| Legal General UCITS |
Vanguard and Legal General Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard and Legal General
The main advantage of trading using opposite Vanguard and Legal General positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard 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.| Vanguard vs. Vanguard FTSE All World | Vanguard vs. iShares Core MSCI | Vanguard vs. Vanguard FTSE All World | Vanguard vs. Vanguard FTSE Emerging |
| Legal General vs. iShares II Public | Legal General vs. iShares Core MSCI | Legal General vs. iShares SP 500 |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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