Correlation Between Legal General and VanEck Multi

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

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

Diversification Opportunities for Legal General and VanEck Multi

0.61

Correlation Coefficient

Legal General  VanEck Multi

Poor diversification

The 3 months correlation between Legal and VanEck is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Legal General UCITS and VanEck Multi Asset Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VanEck Multi Asset and Legal General 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 Legal General UCITS are associated (or correlated) with VanEck Multi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VanEck Multi Asset has no effect on the direction of Legal General i.e., Legal General and VanEck Multi go up and down completely randomly.

Pair Corralation between Legal General and VanEck Multi

Assuming the 90 days trading horizon Legal General UCITS is expected to generate 2.54 times more return on investment than VanEck Multi. However, Legal General is 2.54 times more volatile than VanEck Multi Asset Growth. It trades about 0.07 of its potential returns per unit of risk. VanEck Multi Asset Growth is currently generating about 0.02 per unit of risk. If you would invest  1,568  in Legal General UCITS on September 28, 2024 and sell it today you would earn a total of  68.00  from holding Legal General UCITS or generate 4.34% return on investment over 90 days.

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

Legal General UCITS  vs.  VanEck Multi Asset Growth

Legal General UCITS

Risk-Adjusted Performance

5 of 100

Modest

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

VanEck Multi Asset

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in VanEck Multi Asset Growth are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, VanEck Multi is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Legal General and VanEck Multi

The main advantage of trading using opposite Legal General and VanEck Multi positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Legal General position performs unexpectedly, VanEck Multi 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 VanEck Multi will offset losses from the drop in VanEck Multi's long position.

The idea behind Legal General UCITS and VanEck Multi Asset Growth 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.

Check out your portfolio center.

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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.