Correlation Between Apple and LEGAL GENERAL

Can any of the company-specific risk be diversified away by investing in both Apple 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 Apple and LEGAL GENERAL into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Apple Inc and LEGAL GENERAL, you can compare the effects of market volatilities on Apple 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 Apple with a short position of LEGAL GENERAL. Check out your portfolio center. Please also check ongoing floating volatility patterns of Apple and LEGAL GENERAL.

Diversification Opportunities for Apple and LEGAL GENERAL

0.49

Correlation Coefficient

Apple  LEGAL GENERAL

Very weak diversification

The 3 months correlation between Apple and LEGAL is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc and LEGAL GENERAL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LEGAL GENERAL and Apple 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 Apple Inc 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 has no effect on the direction of Apple i.e., Apple and LEGAL GENERAL go up and down completely randomly.

Pair Corralation between Apple and LEGAL GENERAL

Assuming the 90 days trading horizon Apple Inc is expected to generate 0.53 times more return on investment than LEGAL GENERAL. However, Apple Inc is 1.88 times less risky than LEGAL GENERAL. It trades about 0.58 of its potential returns per unit of risk. LEGAL GENERAL is currently generating about 0.04 per unit of risk. If you would invest  22,015  in Apple Inc on September 23, 2024 and sell it today you would earn a total of  2,335  from holding Apple Inc or generate 10.61% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Apple Inc  vs.  LEGAL GENERAL

Apple Inc

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Apple Inc are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Apple unveiled solid returns over the last few months and may actually be approaching a breakup point.

LEGAL GENERAL

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LEGAL GENERAL has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound forward indicators, LEGAL GENERAL is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Apple and LEGAL GENERAL

The main advantage of trading using opposite Apple and LEGAL GENERAL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Apple 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.

The idea behind Apple Inc and LEGAL GENERAL pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.