Correlation Between CT Private and LEGAL GENERAL

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

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

Diversification Opportunities for CT Private and LEGAL GENERAL

0.87

Correlation Coefficient

CT Private  LEGAL GENERAL

Very poor diversification

The 3 months correlation between CTPE and LEGAL is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding CT Private Equity 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 CT Private 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 CT Private Equity 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 CT Private i.e., CT Private and LEGAL GENERAL go up and down completely randomly.

Pair Corralation between CT Private and LEGAL GENERAL

Assuming the 90 days trading horizon CT Private is expected to generate 2.14 times less return on investment than LEGAL GENERAL. In addition to that, CT Private is 1.4 times more volatile than LEGAL GENERAL UCITS. It trades about 0.07 of its total potential returns per unit of risk. LEGAL GENERAL UCITS is currently generating about 0.21 per unit of volatility. If you would invest  149,670  in LEGAL GENERAL UCITS on October 24, 2024 and sell it today you would earn a total of  6,210  from holding LEGAL GENERAL UCITS or generate 4.15% return on investment over 90 days.

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

CT Private Equity  vs.  LEGAL GENERAL UCITS

CT Private Equity

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CT Private Equity are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, CT Private unveiled solid returns over the last few months and may actually be approaching a breakup point.

LEGAL GENERAL UCITS

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in LEGAL GENERAL UCITS are ranked lower than 12 (%) 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 February 2025.

Pair Trading with CT Private and LEGAL GENERAL

The main advantage of trading using opposite CT Private and LEGAL GENERAL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CT Private 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 CT Private Equity 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.