Correlation Between Xtrackers Nifty and Legal General

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

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

Diversification Opportunities for Xtrackers Nifty and Legal General

-0.14

Correlation Coefficient

Xtrackers Nifty  Legal General

Good diversification

The 3 months correlation between Xtrackers and Legal is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Xtrackers Nifty 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 Xtrackers Nifty 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 Xtrackers Nifty 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 Xtrackers Nifty i.e., Xtrackers Nifty and Legal General go up and down completely randomly.

Pair Corralation between Xtrackers Nifty and Legal General

Assuming the 90 days trading horizon Xtrackers Nifty is expected to under-perform the Legal General. But the etf apears to be less risky and, when comparing its historical volatility, Xtrackers Nifty is 1.15 times less risky than Legal General. The etf trades about -0.07 of its potential returns per unit of risk. The Legal General UCITS is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  1,478  in Legal General UCITS on December 29, 2024 and sell it today you would lose (58.00) from holding Legal General UCITS or give up 3.92% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Xtrackers Nifty  vs.  Legal General UCITS

Xtrackers Nifty

Risk-Adjusted Performance

Very Weak

Over the last 90 days Xtrackers Nifty has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Xtrackers Nifty 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

Very Weak

Over the last 90 days Legal General UCITS has generated negative risk-adjusted returns adding no value to investors with long positions. 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 Xtrackers Nifty and Legal General

The main advantage of trading using opposite Xtrackers Nifty and Legal General positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Xtrackers Nifty 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 Xtrackers Nifty 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.