Correlation Between Legal General and Multi Units

Can any of the company-specific risk be diversified away by investing in both Legal General and Multi Units 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 Multi Units 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 Multi Units Luxembourg, you can compare the effects of market volatilities on Legal General and Multi Units 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 Multi Units. Check out your portfolio center. Please also check ongoing floating volatility patterns of Legal General and Multi Units.

Diversification Opportunities for Legal General and Multi Units

-0.45

Correlation Coefficient

Legal General  Multi Units

Very good diversification

The 3 months correlation between Legal and Multi is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Legal General UCITS and Multi Units Luxembourg in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Multi Units Luxembourg 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 Multi Units. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Multi Units Luxembourg has no effect on the direction of Legal General i.e., Legal General and Multi Units go up and down completely randomly.

Pair Corralation between Legal General and Multi Units

Assuming the 90 days trading horizon Legal General UCITS is expected to generate 1.66 times more return on investment than Multi Units. However, Legal General is 1.66 times more volatile than Multi Units Luxembourg. It trades about 0.18 of its potential returns per unit of risk. Multi Units Luxembourg is currently generating about 0.0 per unit of risk. If you would invest  9,156  in Legal General UCITS on September 13, 2024 and sell it today you would earn a total of  1,650  from holding Legal General UCITS or generate 18.02% return on investment over 90 days.

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

Legal General UCITS  vs.  Multi Units Luxembourg

Legal General UCITS

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Legal General UCITS are ranked lower than 14 (%) 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.

Multi Units Luxembourg

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Legal General and Multi Units

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

The idea behind Legal General UCITS and Multi Units Luxembourg 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.