Correlation Between SPDR MSCI and Legal General
Can any of the company-specific risk be diversified away by investing in both SPDR MSCI 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 SPDR MSCI and Legal General into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SPDR MSCI World and Legal General UCITS, you can compare the effects of market volatilities on SPDR MSCI 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 SPDR MSCI with a short position of Legal General. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR MSCI and Legal General.
Diversification Opportunities for SPDR MSCI and Legal General
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between SPDR and Legal is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding SPDR MSCI World 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 SPDR MSCI 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 SPDR MSCI World 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 SPDR MSCI i.e., SPDR MSCI and Legal General go up and down completely randomly.
Pair Corralation between SPDR MSCI and Legal General
Assuming the 90 days trading horizon SPDR MSCI World is expected to generate 0.97 times more return on investment than Legal General. However, SPDR MSCI World is 1.03 times less risky than Legal General. It trades about 0.1 of its potential returns per unit of risk. Legal General UCITS is currently generating about 0.04 per unit of risk. If you would invest 4,754 in SPDR MSCI World on September 27, 2024 and sell it today you would earn a total of 3,120 from holding SPDR MSCI World or generate 65.63% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Strong |
Accuracy | 100.0% |
Values | Daily Returns |
SPDR MSCI World vs. Legal General UCITS
Performance |
Timeline |
SPDR MSCI World |
Legal General UCITS |
SPDR MSCI and Legal General Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with SPDR MSCI and Legal General
The main advantage of trading using opposite SPDR MSCI and Legal General positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR MSCI 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 SPDR MSCI World 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.Legal General vs. Legal General UCITS | Legal General vs. LG Russell 2000 | Legal General vs. VanEck Multi Asset Growth | Legal General vs. iShares III Public |
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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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