Correlation Between Palo Alto and Legal General

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Can any of the company-specific risk be diversified away by investing in both Palo Alto 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 Palo Alto and Legal General into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Palo Alto Networks and Legal General Group, you can compare the effects of market volatilities on Palo Alto 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 Palo Alto with a short position of Legal General. Check out your portfolio center. Please also check ongoing floating volatility patterns of Palo Alto and Legal General.

Diversification Opportunities for Palo Alto and Legal General

0.53
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Palo Alto and Legal is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Palo Alto Networks and Legal General Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Legal General Group and Palo Alto 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 Palo Alto Networks 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 Group has no effect on the direction of Palo Alto i.e., Palo Alto and Legal General go up and down completely randomly.

Pair Corralation between Palo Alto and Legal General

Given the investment horizon of 90 days Palo Alto Networks is expected to generate 1.28 times more return on investment than Legal General. However, Palo Alto is 1.28 times more volatile than Legal General Group. It trades about 0.3 of its potential returns per unit of risk. Legal General Group is currently generating about 0.29 per unit of risk. If you would invest  14,221  in Palo Alto Networks on September 5, 2022 and sell it today you would earn a total of  3,048  from holding Palo Alto Networks or generate 21.43% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy95.45%
ValuesDaily Returns

Palo Alto Networks  vs.  Legal General Group

 Performance (%) 
       Timeline  
Palo Alto Networks 
Palo Alto Performance
0 of 100
Over the last 90 days Palo Alto Networks has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Palo Alto is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Palo Alto Price Channel

Legal General Group 
Legal Performance
3 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Legal General Group are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Legal General may actually be approaching a critical reversion point that can send shares even higher in January 2023.

Legal Price Channel

Palo Alto and Legal General Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Palo Alto and Legal General

The main advantage of trading using opposite Palo Alto and Legal General positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Palo Alto 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.
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The idea behind Palo Alto Networks and Legal General Group 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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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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.

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