Correlation Between LG Battery and Legal General

Can any of the company-specific risk be diversified away by investing in both LG Battery 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 Battery 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 Battery Value Chain and Legal General UCITS, you can compare the effects of market volatilities on LG Battery 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 Battery with a short position of Legal General. Check out your portfolio center. Please also check ongoing floating volatility patterns of LG Battery and Legal General.

Diversification Opportunities for LG Battery and Legal General

0.72

Correlation Coefficient

LG Battery  Legal General

Poor diversification

The 3 months correlation between BATE and Legal is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding LG Battery Value Chain 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 Battery 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 Battery Value Chain 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 Battery i.e., LG Battery and Legal General go up and down completely randomly.

Pair Corralation between LG Battery and Legal General

Assuming the 90 days trading horizon LG Battery is expected to generate 1.57 times less return on investment than Legal General. In addition to that, LG Battery is 1.07 times more volatile than Legal General UCITS. It trades about 0.08 of its total potential returns per unit of risk. Legal General UCITS is currently generating about 0.14 per unit of volatility. If you would invest  2,063  in Legal General UCITS on October 6, 2024 and sell it today you would earn a total of  136.00  from holding Legal General UCITS or generate 6.59% return on investment over 90 days.

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

LG Battery Value Chain  vs.  Legal General UCITS

LG Battery Value

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in LG Battery Value Chain are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, LG Battery is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Legal General UCITS

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Legal General UCITS are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Legal General is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with LG Battery and Legal General

The main advantage of trading using opposite LG Battery and Legal General positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LG Battery 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 LG Battery Value Chain and Legal General UCITS 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.