Correlation Between Aqr Risk-balanced and Legg Mason
Can any of the company-specific risk be diversified away by investing in both Aqr Risk-balanced and Legg Mason 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 Aqr Risk-balanced and Legg Mason into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Aqr Risk Balanced Modities and Legg Mason Partners, you can compare the effects of market volatilities on Aqr Risk-balanced and Legg Mason 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 Aqr Risk-balanced with a short position of Legg Mason. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aqr Risk-balanced and Legg Mason.
Diversification Opportunities for Aqr Risk-balanced and Legg Mason
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between AQR and Legg is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Aqr Risk Balanced Modities and Legg Mason Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Legg Mason Partners and Aqr Risk-balanced 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 Aqr Risk Balanced Modities are associated (or correlated) with Legg Mason. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Legg Mason Partners has no effect on the direction of Aqr Risk-balanced i.e., Aqr Risk-balanced and Legg Mason go up and down completely randomly.
Pair Corralation between Aqr Risk-balanced and Legg Mason
Assuming the 90 days horizon Aqr Risk-balanced is expected to generate 23.47 times less return on investment than Legg Mason. In addition to that, Aqr Risk-balanced is 1.44 times more volatile than Legg Mason Partners. It trades about 0.01 of its total potential returns per unit of risk. Legg Mason Partners is currently generating about 0.35 per unit of volatility. If you would invest 1,550 in Legg Mason Partners on September 2, 2024 and sell it today you would earn a total of 72.00 from holding Legg Mason Partners or generate 4.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Aqr Risk Balanced Modities vs. Legg Mason Partners
Performance |
| Timeline |
| Aqr Risk Balanced |
| Legg Mason Partners |
Aqr Risk-balanced and Legg Mason Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Aqr Risk-balanced and Legg Mason
The main advantage of trading using opposite Aqr Risk-balanced and Legg Mason positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aqr Risk-balanced position performs unexpectedly, Legg Mason 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 Legg Mason will offset losses from the drop in Legg Mason's long position.| Aqr Risk-balanced vs. Aqr Large Cap | Aqr Risk-balanced vs. Aqr Large Cap | Aqr Risk-balanced vs. Aqr International Defensive | Aqr Risk-balanced vs. Aqr International Defensive |
| Legg Mason vs. Vanguard Total Stock | Legg Mason vs. Vanguard 500 Index | Legg Mason vs. Vanguard Total Stock | Legg Mason vs. Vanguard Total Stock |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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