Correlation Between Intermediate Government and Legg Mason
Can any of the company-specific risk be diversified away by investing in both Intermediate Government 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 Intermediate Government and Legg Mason into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Intermediate Government Bond and Legg Mason Global, you can compare the effects of market volatilities on Intermediate Government 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 Intermediate Government with a short position of Legg Mason. Check out your portfolio center. Please also check ongoing floating volatility patterns of Intermediate Government and Legg Mason.
Diversification Opportunities for Intermediate Government and Legg Mason
0.39 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Intermediate and Legg is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Intermediate Government Bond and Legg Mason Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Legg Mason Global and Intermediate Government 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 Intermediate Government Bond 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 Global has no effect on the direction of Intermediate Government i.e., Intermediate Government and Legg Mason go up and down completely randomly.
Pair Corralation between Intermediate Government and Legg Mason
Assuming the 90 days horizon Intermediate Government Bond is expected to generate 0.34 times more return on investment than Legg Mason. However, Intermediate Government Bond is 2.98 times less risky than Legg Mason. It trades about -0.21 of its potential returns per unit of risk. Legg Mason Global is currently generating about -0.33 per unit of risk. If you would invest 948.00 in Intermediate Government Bond on October 13, 2024 and sell it today you would lose (3.00) from holding Intermediate Government Bond or give up 0.32% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Intermediate Government Bond vs. Legg Mason Global
Performance |
| Timeline |
| Intermediate Government |
| Legg Mason Global |
Intermediate Government and Legg Mason Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Intermediate Government and Legg Mason
The main advantage of trading using opposite Intermediate Government and Legg Mason positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Intermediate Government 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.The idea behind Intermediate Government Bond and Legg Mason Global 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.
| Legg Mason vs. Ridgeworth Seix Government | Legg Mason vs. Intermediate Government Bond | Legg Mason vs. Dreyfus Government Cash | Legg Mason vs. Franklin Adjustable Government |
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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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