Correlation Between Legg Mason and Short-term Investment
Can any of the company-specific risk be diversified away by investing in both Legg Mason and Short-term Investment 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 Short-term Investment 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 Short Term Investment Trust, you can compare the effects of market volatilities on Legg Mason and Short-term Investment 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 Short-term Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Legg Mason and Short-term Investment.
Diversification Opportunities for Legg Mason and Short-term Investment
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Legg and Short-term is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Legg Mason Bw and Short Term Investment Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Short Term Investment 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 Short-term Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Short Term Investment has no effect on the direction of Legg Mason i.e., Legg Mason and Short-term Investment go up and down completely randomly.
Pair Corralation between Legg Mason and Short-term Investment
If you would invest 2,216 in Legg Mason Bw on September 3, 2024 and sell it today you would earn a total of 158.00 from holding Legg Mason Bw or generate 7.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 5.0% |
| Values | Daily Returns |
Legg Mason Bw vs. Short Term Investment Trust
Performance |
| Timeline |
| Legg Mason Bw |
| Short Term Investment |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Legg Mason and Short-term Investment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Legg Mason and Short-term Investment
The main advantage of trading using opposite Legg Mason and Short-term Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Legg Mason position performs unexpectedly, Short-term Investment 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 Short-term Investment will offset losses from the drop in Short-term Investment's long position.| Legg Mason vs. Dodge Cox Stock | Legg Mason vs. American Funds American | Legg Mason vs. American Funds American | Legg Mason vs. American Mutual Fund |
| Short-term Investment vs. Legg Mason Bw | Short-term Investment vs. Blackrock Sm Cap | Short-term Investment vs. Wasatch Small Cap | Short-term Investment vs. Delaware Limited Term Diversified |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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