Correlation Between Legg Mason and Mid Cap
Can any of the company-specific risk be diversified away by investing in both Legg Mason and Mid Cap 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 Mid Cap into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Legg Mason Partners and Mid Cap Value, you can compare the effects of market volatilities on Legg Mason and Mid Cap 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 Mid Cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Legg Mason and Mid Cap.
Diversification Opportunities for Legg Mason and Mid Cap
0.3 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Legg and Mid is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Legg Mason Partners and Mid Cap Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mid Cap Value 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 Partners are associated (or correlated) with Mid Cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mid Cap Value has no effect on the direction of Legg Mason i.e., Legg Mason and Mid Cap go up and down completely randomly.
Pair Corralation between Legg Mason and Mid Cap
If you would invest 1,709 in Mid Cap Value on August 27, 2024 and sell it today you would earn a total of 59.00 from holding Mid Cap Value or generate 3.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Legg Mason Partners vs. Mid Cap Value
Performance |
| Timeline |
| Legg Mason Partners |
| Mid Cap Value |
Legg Mason and Mid Cap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Legg Mason and Mid Cap
The main advantage of trading using opposite Legg Mason and Mid Cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Legg Mason position performs unexpectedly, Mid Cap 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 Mid Cap will offset losses from the drop in Mid Cap's long position.| Legg Mason vs. Vanguard Total Stock | Legg Mason vs. Vanguard 500 Index | Legg Mason vs. Vanguard Total Stock | Legg Mason vs. Vanguard Total Stock |
| Mid Cap vs. Origin Emerging Markets | Mid Cap vs. Legg Mason Partners | Mid Cap vs. Barings Emerging Markets | Mid Cap vs. Sp Midcap Index |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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