Correlation Between Legg Mason and Prudential Global
Can any of the company-specific risk be diversified away by investing in both Legg Mason and Prudential Global 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 Legg Mason and Prudential Global into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Legg Mason Bw and Prudential Global Total, you can compare the effects of market volatilities on Legg Mason and Prudential Global 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 Legg Mason with a short position of Prudential Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of Legg Mason and Prudential Global.
Diversification Opportunities for Legg Mason and Prudential Global
0.98 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Legg and Prudential is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Legg Mason Bw and Prudential Global Total in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prudential Global Total and Legg Mason 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 Legg Mason Bw are associated (or correlated) with Prudential Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prudential Global Total has no effect on the direction of Legg Mason i.e., Legg Mason and Prudential Global go up and down completely randomly.
Pair Corralation between Legg Mason and Prudential Global
Assuming the 90 days horizon Legg Mason Bw is expected to under-perform the Prudential Global. In addition to that, Legg Mason is 1.28 times more volatile than Prudential Global Total. It trades about -0.15 of its total potential returns per unit of risk. Prudential Global Total is currently generating about -0.16 per unit of volatility. If you would invest 519.00 in Prudential Global Total on August 27, 2024 and sell it today you would lose (7.00) from holding Prudential Global Total or give up 1.35% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Legg Mason Bw vs. Prudential Global Total
Performance |
| Timeline |
| Legg Mason Bw |
| Prudential Global Total |
Legg Mason and Prudential Global Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Legg Mason and Prudential Global
The main advantage of trading using opposite Legg Mason and Prudential Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Legg Mason position performs unexpectedly, Prudential Global 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 Prudential Global will offset losses from the drop in Prudential Global's long position.| Legg Mason vs. Franklin Mutual Beacon | Legg Mason vs. Templeton Developing Markets | Legg Mason vs. Franklin Mutual Global | Legg Mason vs. Franklin Mutual Global |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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