Correlation Between LEGAL GENERAL and Apple

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

By analyzing existing cross correlation between LEGAL GENERAL and Apple Inc, you can compare the effects of market volatilities on LEGAL GENERAL and Apple 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 Apple. Check out your portfolio center. Please also check ongoing floating volatility patterns of LEGAL GENERAL and Apple.

Diversification Opportunities for LEGAL GENERAL and Apple

0.49

Correlation Coefficient

LEGAL GENERAL  Apple

Very weak diversification

The 3 months correlation between LEGAL and Apple is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding LEGAL GENERAL and Apple Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Apple Inc 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 are associated (or correlated) with Apple. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Apple Inc has no effect on the direction of LEGAL GENERAL i.e., LEGAL GENERAL and Apple go up and down completely randomly.

Pair Corralation between LEGAL GENERAL and Apple

Assuming the 90 days trading horizon LEGAL GENERAL is expected to generate 20.16 times less return on investment than Apple. But when comparing it to its historical volatility, LEGAL GENERAL is 1.01 times less risky than Apple. It trades about 0.01 of its potential returns per unit of risk. Apple Inc is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  20,415  in Apple Inc on September 23, 2024 and sell it today you would earn a total of  3,700  from holding Apple Inc or generate 18.12% return on investment over 90 days.

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

LEGAL GENERAL  vs.  Apple Inc

LEGAL GENERAL

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LEGAL GENERAL has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound forward indicators, LEGAL GENERAL is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Apple Inc

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Apple Inc are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady fundamental indicators, Apple unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with LEGAL GENERAL and Apple

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

The idea behind LEGAL GENERAL and Apple Inc 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.