Correlation Between IShares Russell and Legg Mason
Can any of the company-specific risk be diversified away by investing in both IShares Russell 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 IShares Russell and Legg Mason into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares Russell 1000 and Legg Mason Low, you can compare the effects of market volatilities on IShares Russell 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 IShares Russell with a short position of Legg Mason. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Russell and Legg Mason.
Diversification Opportunities for IShares Russell and Legg Mason
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between IShares and Legg is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding iShares Russell 1000 and Legg Mason Low in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Legg Mason Low and IShares Russell 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 iShares Russell 1000 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 Low has no effect on the direction of IShares Russell i.e., IShares Russell and Legg Mason go up and down completely randomly.
Pair Corralation between IShares Russell and Legg Mason
Considering the 90-day investment horizon iShares Russell 1000 is expected to generate 1.38 times more return on investment than Legg Mason. However, IShares Russell is 1.38 times more volatile than Legg Mason Low. It trades about 0.39 of its potential returns per unit of risk. Legg Mason Low is currently generating about 0.36 per unit of risk. If you would invest 18,768 in iShares Russell 1000 on September 1, 2024 and sell it today you would earn a total of 1,211 from holding iShares Russell 1000 or generate 6.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares Russell 1000 vs. Legg Mason Low
Performance |
| Timeline |
| iShares Russell 1000 |
| Legg Mason Low |
IShares Russell and Legg Mason Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Russell and Legg Mason
The main advantage of trading using opposite IShares Russell and Legg Mason positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Russell 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.| IShares Russell vs. iShares Russell 1000 | IShares Russell vs. iShares Russell 2000 | IShares Russell vs. iShares Russell 2000 | IShares Russell vs. iShares Russell Mid Cap |
| Legg Mason vs. iShares Core SP | Legg Mason vs. iShares Core MSCI | Legg Mason vs. iShares Broad USD | Legg Mason vs. iShares Core SP |
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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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