Correlation Between Ford and Legg Mason
Can any of the company-specific risk be diversified away by investing in both Ford 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 Ford and Legg Mason into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Legg Mason Bw, you can compare the effects of market volatilities on Ford 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 Ford with a short position of Legg Mason. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Legg Mason.
Diversification Opportunities for Ford and Legg Mason
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Ford and Legg is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor 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 Ford 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 Ford Motor 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 Ford i.e., Ford and Legg Mason go up and down completely randomly.
Pair Corralation between Ford and Legg Mason
Taking into account the 90-day investment horizon Ford Motor is expected to generate 1.99 times more return on investment than Legg Mason. However, Ford is 1.99 times more volatile than Legg Mason Bw. It trades about 0.22 of its potential returns per unit of risk. Legg Mason Bw is currently generating about 0.34 per unit of risk. If you would invest 1,022 in Ford Motor on September 3, 2024 and sell it today you would earn a total of 91.00 from holding Ford Motor or generate 8.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ford Motor vs. Legg Mason Bw
Performance |
| Timeline |
| Ford Motor |
| Legg Mason Bw |
Ford and Legg Mason Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Legg Mason
The main advantage of trading using opposite Ford and Legg Mason positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford 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.| Ford vs. GreenPower Motor | Ford vs. ZEEKR Intelligent Technology | Ford vs. Volcon Inc | Ford vs. Ford Motor |
| Legg Mason vs. Vanguard Value Index | Legg Mason vs. Dodge Cox Stock | Legg Mason vs. American Funds American | Legg Mason vs. American Funds American |
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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