Correlation Between Cisco Systems and Legg Mason
Can any of the company-specific risk be diversified away by investing in both Cisco Systems 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 Cisco Systems and Legg Mason into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cisco Systems and Legg Mason Partners, you can compare the effects of market volatilities on Cisco Systems 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 Cisco Systems with a short position of Legg Mason. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cisco Systems and Legg Mason.
Diversification Opportunities for Cisco Systems and Legg Mason
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Cisco and Legg is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Cisco Systems 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 Cisco Systems 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 Cisco Systems 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 Cisco Systems i.e., Cisco Systems and Legg Mason go up and down completely randomly.
Pair Corralation between Cisco Systems and Legg Mason
Given the investment horizon of 90 days Cisco Systems is expected to generate 1.18 times less return on investment than Legg Mason. In addition to that, Cisco Systems is 1.05 times more volatile than Legg Mason Partners. It trades about 0.05 of its total potential returns per unit of risk. Legg Mason Partners is currently generating about 0.06 per unit of volatility. If you would invest 1,833 in Legg Mason Partners on September 3, 2024 and sell it today you would earn a total of 634.00 from holding Legg Mason Partners or generate 34.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cisco Systems vs. Legg Mason Partners
Performance |
| Timeline |
| Cisco Systems |
| Legg Mason Partners |
Cisco Systems and Legg Mason Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cisco Systems and Legg Mason
The main advantage of trading using opposite Cisco Systems and Legg Mason positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cisco Systems 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.| Cisco Systems vs. Highway Holdings Limited | Cisco Systems vs. QCR Holdings | Cisco Systems vs. Partner Communications | Cisco Systems vs. Acumen Pharmaceuticals |
| 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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