Correlation Between Fair Oaks and Legal General

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

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

Diversification Opportunities for Fair Oaks and Legal General

0.82

Correlation Coefficient

Fair Oaks  Legal General

Very poor diversification

The 3 months correlation between Fair and Legal is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Fair Oaks Income 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 Fair Oaks 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 Fair Oaks Income 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 Fair Oaks i.e., Fair Oaks and Legal General go up and down completely randomly.

Pair Corralation between Fair Oaks and Legal General

Assuming the 90 days trading horizon Fair Oaks is expected to generate 1.3 times less return on investment than Legal General. But when comparing it to its historical volatility, Fair Oaks Income is 1.37 times less risky than Legal General. It trades about 0.1 of its potential returns per unit of risk. 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	Strong
Accuracy	100.0%
Values	Daily Returns

Fair Oaks Income  vs.  Legal General Group

Fair Oaks Income

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fair Oaks Income are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Fair Oaks is not utilizing all of its potentials. The newest 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 Fair Oaks and Legal General

The main advantage of trading using opposite Fair Oaks and Legal General positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fair Oaks 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 Fair Oaks Income 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.