Correlation Between Legg Mason and Ishares Municipal
Can any of the company-specific risk be diversified away by investing in both Legg Mason and Ishares Municipal 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 Ishares Municipal 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 Ishares Municipal Bond, you can compare the effects of market volatilities on Legg Mason and Ishares Municipal 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 Ishares Municipal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Legg Mason and Ishares Municipal.
Diversification Opportunities for Legg Mason and Ishares Municipal
0.4 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Legg and Ishares is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Legg Mason Bw and Ishares Municipal Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ishares Municipal Bond 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 Ishares Municipal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ishares Municipal Bond has no effect on the direction of Legg Mason i.e., Legg Mason and Ishares Municipal go up and down completely randomly.
Pair Corralation between Legg Mason and Ishares Municipal
Assuming the 90 days horizon Legg Mason is expected to generate 8.68 times less return on investment than Ishares Municipal. In addition to that, Legg Mason is 2.72 times more volatile than Ishares Municipal Bond. It trades about 0.0 of its total potential returns per unit of risk. Ishares Municipal Bond is currently generating about 0.07 per unit of volatility. If you would invest 1,031 in Ishares Municipal Bond on September 13, 2024 and sell it today you would earn a total of 86.00 from holding Ishares Municipal Bond or generate 8.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.8% |
| Values | Daily Returns |
Legg Mason Bw vs. Ishares Municipal Bond
Performance |
| Timeline |
| Legg Mason Bw |
| Ishares Municipal Bond |
Legg Mason and Ishares Municipal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Legg Mason and Ishares Municipal
The main advantage of trading using opposite Legg Mason and Ishares Municipal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Legg Mason position performs unexpectedly, Ishares Municipal 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 Ishares Municipal will offset losses from the drop in Ishares Municipal's long position.| Legg Mason vs. Clearbridge Aggressive Growth | Legg Mason vs. Clearbridge Small Cap | Legg Mason vs. Qs International Equity | Legg Mason vs. Clearbridge Appreciation Fund |
| Ishares Municipal vs. Calamos Dynamic Convertible | Ishares Municipal vs. Allianzgi Convertible Income | Ishares Municipal vs. Fidelity Sai Convertible | Ishares Municipal vs. Absolute Convertible Arbitrage |
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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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