Correlation Between Legg Mason and Capital Management
Can any of the company-specific risk be diversified away by investing in both Legg Mason and Capital Management 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 Capital Management into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Legg Mason Bw and Capital Management Mid Cap, you can compare the effects of market volatilities on Legg Mason and Capital Management 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 Capital Management. Check out your portfolio center. Please also check ongoing floating volatility patterns of Legg Mason and Capital Management.
Diversification Opportunities for Legg Mason and Capital Management
-0.57 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Legg and Capital is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Legg Mason Bw and Capital Management Mid Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital Management Mid 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 Bw are associated (or correlated) with Capital Management. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital Management Mid has no effect on the direction of Legg Mason i.e., Legg Mason and Capital Management go up and down completely randomly.
Pair Corralation between Legg Mason and Capital Management
Assuming the 90 days horizon Legg Mason Bw is expected to generate 0.84 times more return on investment than Capital Management. However, Legg Mason Bw is 1.19 times less risky than Capital Management. It trades about 0.16 of its potential returns per unit of risk. Capital Management Mid Cap is currently generating about 0.05 per unit of risk. If you would invest 1,803 in Legg Mason Bw on September 4, 2024 and sell it today you would earn a total of 571.00 from holding Legg Mason Bw or generate 31.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Legg Mason Bw vs. Capital Management Mid Cap
Performance |
| Timeline |
| Legg Mason Bw |
| Capital Management Mid |
Legg Mason and Capital Management Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Legg Mason and Capital Management
The main advantage of trading using opposite Legg Mason and Capital Management positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Legg Mason position performs unexpectedly, Capital Management 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 Capital Management will offset losses from the drop in Capital Management's long position.| Legg Mason vs. Clearbridge Aggressive Growth | Legg Mason vs. Clearbridge Small Cap | Legg Mason vs. Qs International Equity | Legg Mason vs. Clearbridge Appreciation Fund |
| Capital Management vs. Rbc Short Duration | Capital Management vs. Siit Ultra Short | Capital Management vs. Old Westbury Short Term | Capital Management vs. Calvert Short Duration |
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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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