Correlation Between Bankers Investment and Legal General

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

By analyzing existing cross correlation between Bankers Investment Trust and Legal General Group, you can compare the effects of market volatilities on Bankers Investment 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 Bankers Investment with a short position of Legal General. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bankers Investment and Legal General.

Diversification Opportunities for Bankers Investment and Legal General

0.09

Correlation Coefficient

Bankers Investment  Legal General

Significant diversification

The 3 months correlation between Bankers and Legal is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Bankers Investment Trust 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 Bankers Investment 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 Bankers Investment Trust 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 Bankers Investment i.e., Bankers Investment and Legal General go up and down completely randomly.

Pair Corralation between Bankers Investment and Legal General

Assuming the 90 days trading horizon Bankers Investment Trust is expected to under-perform the Legal General. But the fund apears to be less risky and, when comparing its historical volatility, Bankers Investment Trust is 1.2 times less risky than Legal General. The fund trades about -0.03 of its potential returns per unit of risk. The Legal General Group is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  22,710  in Legal General Group on December 30, 2024 and sell it today you would earn a total of  1,680  from holding Legal General Group or generate 7.4% return on investment over 90 days.

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

Bankers Investment Trust  vs.  Legal General Group

Bankers Investment Trust

Risk-Adjusted Performance

Very Weak

Over the last 90 days Bankers Investment Trust has generated negative risk-adjusted returns adding no value to fund investors. In spite of comparatively stable basic indicators, Bankers Investment is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Legal General Group

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Legal General Group are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Legal General may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Bankers Investment and Legal General

The main advantage of trading using opposite Bankers Investment and Legal General positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bankers Investment 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 Bankers Investment Trust and Legal General Group 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.