Correlation Between GlobalData PLC and Legal General

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

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

Diversification Opportunities for GlobalData PLC and Legal General

-0.08

Correlation Coefficient

GlobalData PLC  Legal General

Good diversification

The 3 months correlation between GlobalData and Legal is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding GlobalData PLC 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 GlobalData PLC 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 GlobalData PLC 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 GlobalData PLC i.e., GlobalData PLC and Legal General go up and down completely randomly.

Pair Corralation between GlobalData PLC and Legal General

Assuming the 90 days trading horizon GlobalData PLC is expected to under-perform the Legal General. In addition to that, GlobalData PLC is 1.96 times more volatile than Legal General Group. It trades about -0.06 of its total potential returns per unit of risk. Legal General Group is currently generating about 0.0 per unit of volatility. If you would invest  22,420  in Legal General Group on September 4, 2024 and sell it today you would lose (70.00) from holding Legal General Group or give up 0.31% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

GlobalData PLC  vs.  Legal General Group

GlobalData PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GlobalData PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Legal General Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Legal General Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Legal General is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with GlobalData PLC and Legal General

The main advantage of trading using opposite GlobalData PLC and Legal General positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GlobalData PLC 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 GlobalData PLC 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.