Correlation Between Gmo High and Leggmason Partners
Can any of the company-specific risk be diversified away by investing in both Gmo High and Leggmason Partners 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 Gmo High and Leggmason Partners into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Gmo High Yield and Leggmason Partners Institutional, you can compare the effects of market volatilities on Gmo High and Leggmason Partners 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 Gmo High with a short position of Leggmason Partners. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gmo High and Leggmason Partners.
Diversification Opportunities for Gmo High and Leggmason Partners
0.35 | Correlation Coefficient |
Weak diversification
The 3 months correlation between GMO and Leggmason is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Gmo High Yield and Leggmason Partners Institution in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Leggmason Partners and Gmo High 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 Gmo High Yield are associated (or correlated) with Leggmason Partners. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Leggmason Partners has no effect on the direction of Gmo High i.e., Gmo High and Leggmason Partners go up and down completely randomly.
Pair Corralation between Gmo High and Leggmason Partners
Assuming the 90 days horizon Gmo High Yield is expected to generate 0.4 times more return on investment than Leggmason Partners. However, Gmo High Yield is 2.5 times less risky than Leggmason Partners. It trades about 0.13 of its potential returns per unit of risk. Leggmason Partners Institutional is currently generating about 0.02 per unit of risk. If you would invest 1,541 in Gmo High Yield on September 4, 2024 and sell it today you would earn a total of 267.00 from holding Gmo High Yield or generate 17.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 82.4% |
| Values | Daily Returns |
Gmo High Yield vs. Leggmason Partners Institution
Performance |
| Timeline |
| Gmo High Yield |
| Leggmason Partners |
Gmo High and Leggmason Partners Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Gmo High and Leggmason Partners
The main advantage of trading using opposite Gmo High and Leggmason Partners positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gmo High position performs unexpectedly, Leggmason Partners 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 Leggmason Partners will offset losses from the drop in Leggmason Partners' long position.| Gmo High vs. California High Yield Municipal | Gmo High vs. Siit High Yield | Gmo High vs. Pace High Yield |
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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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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