Correlation Between Legg Mason and Prudential Short
Can any of the company-specific risk be diversified away by investing in both Legg Mason and Prudential Short 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 Prudential Short 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 Prudential Short Duration, you can compare the effects of market volatilities on Legg Mason and Prudential Short 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 Prudential Short. Check out your portfolio center. Please also check ongoing floating volatility patterns of Legg Mason and Prudential Short.
Diversification Opportunities for Legg Mason and Prudential Short
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Legg and Prudential is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Legg Mason Partners and Prudential Short Duration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prudential Short Duration 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 Prudential Short. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prudential Short Duration has no effect on the direction of Legg Mason i.e., Legg Mason and Prudential Short go up and down completely randomly.
Pair Corralation between Legg Mason and Prudential Short
If you would invest 842.00 in Prudential Short Duration on August 27, 2024 and sell it today you would earn a total of 2.00 from holding Prudential Short Duration or generate 0.24% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Legg Mason Partners vs. Prudential Short Duration
Performance |
| Timeline |
| Legg Mason Partners |
| Prudential Short Duration |
Legg Mason and Prudential Short Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Legg Mason and Prudential Short
The main advantage of trading using opposite Legg Mason and Prudential Short positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Legg Mason position performs unexpectedly, Prudential Short 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 Prudential Short will offset losses from the drop in Prudential Short'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 |
| Prudential Short vs. Legg Mason Partners | Prudential Short vs. Ep Emerging Markets | Prudential Short vs. Extended Market Index | Prudential Short vs. Transamerica Emerging Markets |
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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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