Correlation Between Legg Mason and Gateway Equity
Can any of the company-specific risk be diversified away by investing in both Legg Mason and Gateway Equity 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 Gateway Equity 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 Gateway Equity Call, you can compare the effects of market volatilities on Legg Mason and Gateway Equity 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 Gateway Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Legg Mason and Gateway Equity.
Diversification Opportunities for Legg Mason and Gateway Equity
0.24 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Legg and Gateway is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Legg Mason Partners and Gateway Equity Call in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gateway Equity Call 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 Gateway Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gateway Equity Call has no effect on the direction of Legg Mason i.e., Legg Mason and Gateway Equity go up and down completely randomly.
Pair Corralation between Legg Mason and Gateway Equity
Assuming the 90 days horizon Legg Mason Partners is expected to generate 42.86 times more return on investment than Gateway Equity. However, Legg Mason is 42.86 times more volatile than Gateway Equity Call. It trades about 0.04 of its potential returns per unit of risk. Gateway Equity Call is currently generating about 0.12 per unit of risk. If you would invest 93.00 in Legg Mason Partners on August 31, 2024 and sell it today you would earn a total of 7.00 from holding Legg Mason Partners or generate 7.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.47% |
| Values | Daily Returns |
Legg Mason Partners vs. Gateway Equity Call
Performance |
| Timeline |
| Legg Mason Partners |
| Gateway Equity Call |
Legg Mason and Gateway Equity Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Legg Mason and Gateway Equity
The main advantage of trading using opposite Legg Mason and Gateway Equity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Legg Mason position performs unexpectedly, Gateway Equity 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 Gateway Equity will offset losses from the drop in Gateway Equity's long position.| Legg Mason vs. Hennessy Technology Fund | Legg Mason vs. Dreyfus Technology Growth | Legg Mason vs. Allianzgi Technology Fund | Legg Mason vs. Columbia Global Technology |
| Gateway Equity vs. Fidelity Small Cap | Gateway Equity vs. Heartland Value Plus | Gateway Equity vs. Boston Partners Small | Gateway Equity vs. Applied Finance Explorer |
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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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