Correlation Between IShares Core and Legal General

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

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

Diversification Opportunities for IShares Core and Legal General

0.88

Correlation Coefficient

IShares Core  Legal General

Very poor diversification

The 3 months correlation between IShares and Legal is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding iShares Core MSCI 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 IShares Core 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 iShares Core MSCI 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 IShares Core i.e., IShares Core and Legal General go up and down completely randomly.

Pair Corralation between IShares Core and Legal General

Assuming the 90 days trading horizon IShares Core is expected to generate 1.24 times less return on investment than Legal General. But when comparing it to its historical volatility, iShares Core MSCI is 1.83 times less risky than Legal General. It trades about 0.14 of its potential returns per unit of risk. Legal General UCITS is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  1,613  in Legal General UCITS on February 3, 2024 and sell it today you would earn a total of  46.00  from holding Legal General UCITS or generate 2.85% return on investment over 90 days.

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

iShares Core MSCI  vs.  Legal General UCITS

iShares Core MSCI

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Core MSCI are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, IShares Core may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Legal General UCITS

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Legal General UCITS are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Legal General unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with IShares Core and Legal General

The main advantage of trading using opposite IShares Core and Legal General positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Core 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 iShares Core MSCI 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.