Correlation Between Xtrackers and Legal General

Can any of the company-specific risk be diversified away by investing in both Xtrackers 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 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 II and Legal General UCITS, you can compare the effects of market volatilities on Xtrackers 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 with a short position of Legal General. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xtrackers and Legal General.

Diversification Opportunities for Xtrackers and Legal General

0.65

Correlation Coefficient

Xtrackers  Legal General

Poor diversification

The 3 months correlation between Xtrackers and Legal is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Xtrackers II 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 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 II 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 i.e., Xtrackers and Legal General go up and down completely randomly.

Pair Corralation between Xtrackers and Legal General

Assuming the 90 days trading horizon Xtrackers II is expected to generate 0.54 times more return on investment than Legal General. However, Xtrackers II is 1.85 times less risky than Legal General. It trades about -0.06 of its potential returns per unit of risk. Legal General UCITS is currently generating about -0.16 per unit of risk. If you would invest  752.00  in Xtrackers II on December 30, 2024 and sell it today you would lose (23.00) from holding Xtrackers II or give up 3.06% of portfolio value over 90 days.

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

Xtrackers II   vs.  Legal General UCITS

Xtrackers II

Risk-Adjusted Performance

Very Weak

Over the last 90 days Xtrackers II has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Xtrackers 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. In spite of weak performance in the last few months, the Etf's basic indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the fund shareholders.

Pair Trading with Xtrackers and Legal General

The main advantage of trading using opposite Xtrackers and Legal General positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Xtrackers 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 II 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.