Correlation Between Nasdaq and Legal General

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

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

Diversification Opportunities for Nasdaq and Legal General

0.95

Correlation Coefficient

Nasdaq  Legal General

Almost no diversification

The 3 months correlation between Nasdaq and Legal is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq Inc 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 Nasdaq 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 Nasdaq Inc 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 Nasdaq i.e., Nasdaq and Legal General go up and down completely randomly.

Pair Corralation between Nasdaq and Legal General

Given the investment horizon of 90 days Nasdaq is expected to generate 3.81 times less return on investment than Legal General. But when comparing it to its historical volatility, Nasdaq Inc is 1.27 times less risky than Legal General. It trades about 0.05 of its potential returns per unit of risk. Legal General UCITS is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  10,458  in Legal General UCITS on September 17, 2024 and sell it today you would earn a total of  310.00  from holding Legal General UCITS or generate 2.96% return on investment over 90 days.

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

Nasdaq Inc  vs.  Legal General UCITS

Nasdaq Inc

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Nasdaq Inc are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, Nasdaq may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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. Despite nearly fragile essential indicators, Legal General reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nasdaq and Legal General

The main advantage of trading using opposite Nasdaq and Legal General positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nasdaq 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 Nasdaq Inc 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.