Correlation Between Elysee Development and Legal General

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

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

Diversification Opportunities for Elysee Development and Legal General

0.37

Correlation Coefficient

Elysee Development  Legal General

Weak diversification

The 3 months correlation between Elysee and Legal is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Elysee Development Corp 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 Elysee Development 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 Elysee Development Corp 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 Elysee Development i.e., Elysee Development and Legal General go up and down completely randomly.

Pair Corralation between Elysee Development and Legal General

Assuming the 90 days horizon Elysee Development Corp is expected to under-perform the Legal General. In addition to that, Elysee Development is 4.4 times more volatile than Legal General Group. It trades about -0.01 of its total potential returns per unit of risk. Legal General Group is currently generating about 0.03 per unit of volatility. If you would invest  1,482  in Legal General Group on September 13, 2024 and sell it today you would earn a total of  24.00  from holding Legal General Group or generate 1.62% return on investment over 90 days.

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

Elysee Development Corp  vs.  Legal General Group

Elysee Development Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Elysee Development Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Elysee Development is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Legal General Group

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Legal General Group are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Legal General is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Elysee Development and Legal General

The main advantage of trading using opposite Elysee Development and Legal General positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Elysee Development 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 Elysee Development Corp 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.