Correlation Between Six Circles and Legg Mason
Can any of the company-specific risk be diversified away by investing in both Six Circles 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 Six Circles and Legg Mason into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Six Circles Ultra and Legg Mason Bw, you can compare the effects of market volatilities on Six Circles 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 Six Circles with a short position of Legg Mason. Check out your portfolio center. Please also check ongoing floating volatility patterns of Six Circles and Legg Mason.
Diversification Opportunities for Six Circles and Legg Mason
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Six and Legg is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Six Circles Ultra and Legg Mason Bw in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Legg Mason Bw and Six Circles 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 Six Circles Ultra 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 Bw has no effect on the direction of Six Circles i.e., Six Circles and Legg Mason go up and down completely randomly.
Pair Corralation between Six Circles and Legg Mason
Assuming the 90 days horizon Six Circles is expected to generate 10.64 times less return on investment than Legg Mason. But when comparing it to its historical volatility, Six Circles Ultra is 11.21 times less risky than Legg Mason. It trades about 0.18 of its potential returns per unit of risk. Legg Mason Bw is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 2,196 in Legg Mason Bw on September 3, 2024 and sell it today you would earn a total of 192.00 from holding Legg Mason Bw or generate 8.74% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Six Circles Ultra vs. Legg Mason Bw
Performance |
| Timeline |
| Six Circles Ultra |
| Legg Mason Bw |
Six Circles and Legg Mason Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Six Circles and Legg Mason
The main advantage of trading using opposite Six Circles and Legg Mason positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Six Circles 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.| Six Circles vs. Calvert High Yield | Six Circles vs. Gmo High Yield | Six Circles vs. Goldman Sachs High | Six Circles vs. Artisan High Income |
| Legg Mason vs. Mutual Of America | Legg Mason vs. Victory Rs Partners | Legg Mason vs. Royce Opportunity Fund | Legg Mason vs. Hennessy Nerstone Mid |
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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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