Correlation Between Highland Merger and Legg Mason
Can any of the company-specific risk be diversified away by investing in both Highland Merger 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 Highland Merger and Legg Mason into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Highland Merger Arbitrage and Legg Mason Partners, you can compare the effects of market volatilities on Highland Merger 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 Highland Merger with a short position of Legg Mason. Check out your portfolio center. Please also check ongoing floating volatility patterns of Highland Merger and Legg Mason.
Diversification Opportunities for Highland Merger and Legg Mason
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Highland and Legg is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Highland Merger Arbitrage 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 Highland Merger 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 Highland Merger Arbitrage 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 Highland Merger i.e., Highland Merger and Legg Mason go up and down completely randomly.
Pair Corralation between Highland Merger and Legg Mason
Assuming the 90 days horizon Highland Merger is expected to generate 3.76 times less return on investment than Legg Mason. But when comparing it to its historical volatility, Highland Merger Arbitrage is 1.73 times less risky than Legg Mason. It trades about 0.14 of its potential returns per unit of risk. Legg Mason Partners is currently generating about 0.31 of returns per unit of risk over similar time horizon. If you would invest 665.00 in Legg Mason Partners on September 1, 2024 and sell it today you would earn a total of 8.00 from holding Legg Mason Partners or generate 1.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Highland Merger Arbitrage vs. Legg Mason Partners
Performance |
| Timeline |
| Highland Merger Arbitrage |
| Legg Mason Partners |
Highland Merger and Legg Mason Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Highland Merger and Legg Mason
The main advantage of trading using opposite Highland Merger and Legg Mason positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Highland Merger 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.| Highland Merger vs. Legg Mason Partners | Highland Merger vs. Mesirow Financial High | Highland Merger vs. Prudential Short Duration | Highland Merger vs. Federated Institutional High |
| 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
Other Complementary Tools
| Money Flow Index Determine momentum by analyzing Money Flow Index and other technical indicators | |
| Options Analysis Analyze and evaluate options and option chains as a potential hedge for your portfolios | |
| Earnings Calls Check upcoming earnings announcements updated hourly across public exchanges | |
| Competition Analyzer Analyze and compare many basic indicators for a group of related or unrelated entities | |
| Portfolio Volatility Check portfolio volatility and analyze historical return density to properly model market risk |