Correlation Between Sterling Capital and Legg Mason
Can any of the company-specific risk be diversified away by investing in both Sterling Capital 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 Sterling Capital and Legg Mason into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sterling Capital Total and Legg Mason Partners, you can compare the effects of market volatilities on Sterling Capital 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 Sterling Capital with a short position of Legg Mason. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sterling Capital and Legg Mason.
Diversification Opportunities for Sterling Capital and Legg Mason
-0.69 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Sterling and Legg is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Sterling Capital Total 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 Sterling Capital 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 Sterling Capital Total 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 Sterling Capital i.e., Sterling Capital and Legg Mason go up and down completely randomly.
Pair Corralation between Sterling Capital and Legg Mason
Assuming the 90 days horizon Sterling Capital is expected to generate 4.86 times less return on investment than Legg Mason. But when comparing it to its historical volatility, Sterling Capital Total is 2.14 times less risky than Legg Mason. It trades about 0.15 of its potential returns per unit of risk. Legg Mason Partners is currently generating about 0.34 of returns per unit of risk over similar time horizon. If you would invest 2,336 in Legg Mason Partners on September 4, 2024 and sell it today you would earn a total of 118.00 from holding Legg Mason Partners or generate 5.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 95.24% |
| Values | Daily Returns |
Sterling Capital Total vs. Legg Mason Partners
Performance |
| Timeline |
| Sterling Capital Total |
| Legg Mason Partners |
Sterling Capital and Legg Mason Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sterling Capital and Legg Mason
The main advantage of trading using opposite Sterling Capital and Legg Mason positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sterling Capital 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.| Sterling Capital vs. Mfs Technology Fund | Sterling Capital vs. Towpath Technology | Sterling Capital vs. Vanguard Information Technology | Sterling Capital vs. Dreyfus Technology Growth |
| 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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