Correlation Between Legg Mason and Johnson Municipal
Can any of the company-specific risk be diversified away by investing in both Legg Mason and Johnson Municipal 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 Johnson Municipal 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 Johnson Municipal Income, you can compare the effects of market volatilities on Legg Mason and Johnson Municipal 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 Johnson Municipal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Legg Mason and Johnson Municipal.
Diversification Opportunities for Legg Mason and Johnson Municipal
0.13 | Correlation Coefficient |
Average diversification
The 3 months correlation between Legg and Johnson is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Legg Mason Bw and Johnson Municipal Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Johnson Municipal Income 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 Johnson Municipal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Johnson Municipal Income has no effect on the direction of Legg Mason i.e., Legg Mason and Johnson Municipal go up and down completely randomly.
Pair Corralation between Legg Mason and Johnson Municipal
Assuming the 90 days horizon Legg Mason Bw is expected to generate 3.18 times more return on investment than Johnson Municipal. However, Legg Mason is 3.18 times more volatile than Johnson Municipal Income. It trades about 0.1 of its potential returns per unit of risk. Johnson Municipal Income is currently generating about 0.07 per unit of risk. If you would invest 1,802 in Legg Mason Bw on September 12, 2024 and sell it today you would earn a total of 506.00 from holding Legg Mason Bw or generate 28.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Legg Mason Bw vs. Johnson Municipal Income
Performance |
| Timeline |
| Legg Mason Bw |
| Johnson Municipal Income |
Legg Mason and Johnson Municipal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Legg Mason and Johnson Municipal
The main advantage of trading using opposite Legg Mason and Johnson Municipal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Legg Mason position performs unexpectedly, Johnson Municipal 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 Johnson Municipal will offset losses from the drop in Johnson Municipal's long position.| Legg Mason vs. Simt Multi Asset Inflation | Legg Mason vs. Loomis Sayles Inflation | Legg Mason vs. Guggenheim Managed Futures | Legg Mason vs. Ab Bond Inflation |
| Johnson Municipal vs. T Rowe Price | Johnson Municipal vs. Blrc Sgy Mnp | Johnson Municipal vs. T Rowe Price | Johnson Municipal vs. Franklin High Yield |
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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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