Correlation Between The Emerging and Legg Mason
Can any of the company-specific risk be diversified away by investing in both The Emerging 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 The Emerging and Legg Mason into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between The Emerging Markets and Legg Mason Partners, you can compare the effects of market volatilities on The Emerging 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 The Emerging with a short position of Legg Mason. Check out your portfolio center. Please also check ongoing floating volatility patterns of The Emerging and Legg Mason.
Diversification Opportunities for The Emerging and Legg Mason
0.24 | Correlation Coefficient |
Modest diversification
The 3 months correlation between The and Legg is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding The Emerging Markets and Legg Mason Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Legg Mason Partners and The Emerging 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 The Emerging Markets 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 Partners has no effect on the direction of The Emerging i.e., The Emerging and Legg Mason go up and down completely randomly.
Pair Corralation between The Emerging and Legg Mason
Assuming the 90 days horizon The Emerging is expected to generate 4.57 times less return on investment than Legg Mason. In addition to that, The Emerging is 1.47 times more volatile than Legg Mason Partners. It trades about 0.03 of its total potential returns per unit of risk. Legg Mason Partners is currently generating about 0.17 per unit of volatility. If you would invest 2,160 in Legg Mason Partners on September 3, 2024 and sell it today you would earn a total of 307.00 from holding Legg Mason Partners or generate 14.21% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
The Emerging Markets vs. Legg Mason Partners
Performance |
| Timeline |
| Emerging Markets |
| Legg Mason Partners |
The Emerging and Legg Mason Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with The Emerging and Legg Mason
The main advantage of trading using opposite The Emerging and Legg Mason positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if The Emerging 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 Emerging vs. Vanguard Total Stock | The Emerging vs. Vanguard 500 Index | The Emerging vs. Vanguard Total Stock | The Emerging vs. Vanguard Total Stock |
| Legg Mason vs. Vanguard Total Stock | Legg Mason vs. Vanguard 500 Index | Legg Mason vs. Vanguard Total Stock | Legg Mason vs. Vanguard Total Stock |
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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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