Correlation Between SPDR Gold and Legal General

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

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

Diversification Opportunities for SPDR Gold and Legal General

-0.42

Correlation Coefficient

SPDR Gold  Legal General

Very good diversification

The 3 months correlation between SPDR and Legal is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding SPDR Gold Shares 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 SPDR Gold 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 SPDR Gold Shares 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 SPDR Gold i.e., SPDR Gold and Legal General go up and down completely randomly.

Pair Corralation between SPDR Gold and Legal General

Assuming the 90 days trading horizon SPDR Gold Shares is expected to generate 0.92 times more return on investment than Legal General. However, SPDR Gold Shares is 1.08 times less risky than Legal General. It trades about 0.32 of its potential returns per unit of risk. Legal General UCITS is currently generating about 0.15 per unit of risk. If you would invest  22,945  in SPDR Gold Shares on October 20, 2024 and sell it today you would earn a total of  1,314  from holding SPDR Gold Shares or generate 5.73% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	94.44%
Values	Daily Returns

SPDR Gold Shares  vs.  Legal General UCITS

SPDR Gold Shares

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR Gold Shares are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, SPDR Gold is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Legal General UCITS

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Legal General UCITS are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable essential 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 SPDR Gold and Legal General

The main advantage of trading using opposite SPDR Gold and Legal General positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR Gold 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 SPDR Gold Shares 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.