Correlation Between Target Healthcare and Legal General

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

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

Diversification Opportunities for Target Healthcare and Legal General

0.79

Correlation Coefficient

Target Healthcare  Legal General

Poor diversification

The 3 months correlation between Target and Legal is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Target Healthcare REIT 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 Target Healthcare 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 Target Healthcare REIT 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 Target Healthcare i.e., Target Healthcare and Legal General go up and down completely randomly.

Pair Corralation between Target Healthcare and Legal General

Assuming the 90 days trading horizon Target Healthcare is expected to generate 3.0 times less return on investment than Legal General. In addition to that, Target Healthcare is 1.3 times more volatile than Legal General Group. It trades about 0.05 of its total potential returns per unit of risk. Legal General Group is currently generating about 0.19 per unit of volatility. If you would invest  23,452  in Legal General Group on April 20, 2025 and sell it today you would earn a total of  2,238  from holding Legal General Group or generate 9.54% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.41%
Values	Daily Returns

Target Healthcare REIT  vs.  Legal General Group

Target Healthcare REIT

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Target Healthcare REIT are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Target Healthcare is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Legal General Group

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Legal General Group are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Legal General may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with Target Healthcare and Legal General

The main advantage of trading using opposite Target Healthcare and Legal General positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Target Healthcare 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 Target Healthcare REIT 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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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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.