Correlation Between Legg Mason and Cullen High
Can any of the company-specific risk be diversified away by investing in both Legg Mason and Cullen High 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 Cullen High 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 Cullen High Dividend, you can compare the effects of market volatilities on Legg Mason and Cullen High 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 Cullen High. Check out your portfolio center. Please also check ongoing floating volatility patterns of Legg Mason and Cullen High.
Diversification Opportunities for Legg Mason and Cullen High
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Legg and Cullen is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Legg Mason Bw and Cullen High Dividend in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cullen High Dividend 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 Cullen High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cullen High Dividend has no effect on the direction of Legg Mason i.e., Legg Mason and Cullen High go up and down completely randomly.
Pair Corralation between Legg Mason and Cullen High
Assuming the 90 days horizon Legg Mason Bw is expected to generate 1.25 times more return on investment than Cullen High. However, Legg Mason is 1.25 times more volatile than Cullen High Dividend. It trades about 0.16 of its potential returns per unit of risk. Cullen High Dividend is currently generating about 0.09 per unit of risk. If you would invest 2,043 in Legg Mason Bw on September 3, 2024 and sell it today you would earn a total of 345.00 from holding Legg Mason Bw or generate 16.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Legg Mason Bw vs. Cullen High Dividend
Performance |
| Timeline |
| Legg Mason Bw |
| Cullen High Dividend |
Legg Mason and Cullen High Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Legg Mason and Cullen High
The main advantage of trading using opposite Legg Mason and Cullen High positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Legg Mason position performs unexpectedly, Cullen High 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 Cullen High will offset losses from the drop in Cullen High's long position.| Legg Mason vs. Mutual Of America | Legg Mason vs. Victory Rs Partners | Legg Mason vs. Royce Opportunity Fund | Legg Mason vs. Hennessy Nerstone Mid |
| Cullen High vs. American Funds Conservative | Cullen High vs. Oppenheimer International Diversified | Cullen High vs. Massmutual Premier Diversified | Cullen High vs. Jhancock Diversified Macro |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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