Correlation Between Xtrackers and Legal General

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

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

Diversification Opportunities for Xtrackers and Legal General

-0.57

Correlation Coefficient

Xtrackers  Legal General

Excellent diversification

The 3 months correlation between Xtrackers and Legal is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Xtrackers II 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 Xtrackers 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 Xtrackers II 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 Xtrackers i.e., Xtrackers and Legal General go up and down completely randomly.

Pair Corralation between Xtrackers and Legal General

Assuming the 90 days trading horizon Xtrackers II is expected to under-perform the Legal General. In addition to that, Xtrackers is 1.26 times more volatile than Legal General UCITS. It trades about -0.07 of its total potential returns per unit of risk. Legal General UCITS is currently generating about 0.21 per unit of volatility. If you would invest  1,993  in Legal General UCITS on September 17, 2024 and sell it today you would earn a total of  185.00  from holding Legal General UCITS or generate 9.28% return on investment over 90 days.

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

Xtrackers II   vs.  Legal General UCITS

Xtrackers II

Risk-Adjusted Performance

0 of 100

Very Weak

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

Legal General UCITS

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Legal General UCITS are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile essential indicators, Legal General may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Xtrackers and Legal General

The main advantage of trading using opposite Xtrackers and Legal General positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Xtrackers 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 Xtrackers II 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.

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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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.