Correlation Between Legg Mason and Pace Large
Can any of the company-specific risk be diversified away by investing in both Legg Mason and Pace Large 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 Pace Large 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 Pace Large Growth, you can compare the effects of market volatilities on Legg Mason and Pace Large 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 Pace Large. Check out your portfolio center. Please also check ongoing floating volatility patterns of Legg Mason and Pace Large.
Diversification Opportunities for Legg Mason and Pace Large
0.93 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Legg and Pace is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Legg Mason Bw and Pace Large Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pace Large Growth 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 Pace Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pace Large Growth has no effect on the direction of Legg Mason i.e., Legg Mason and Pace Large go up and down completely randomly.
Pair Corralation between Legg Mason and Pace Large
Assuming the 90 days horizon Legg Mason Bw is expected to generate 1.18 times more return on investment than Pace Large. However, Legg Mason is 1.18 times more volatile than Pace Large Growth. It trades about 0.31 of its potential returns per unit of risk. Pace Large Growth is currently generating about 0.32 per unit of risk. If you would invest 2,237 in Legg Mason Bw on September 2, 2024 and sell it today you would earn a total of 151.00 from holding Legg Mason Bw or generate 6.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Legg Mason Bw vs. Pace Large Growth
Performance |
| Timeline |
| Legg Mason Bw |
| Pace Large Growth |
Legg Mason and Pace Large Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Legg Mason and Pace Large
The main advantage of trading using opposite Legg Mason and Pace Large positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Legg Mason position performs unexpectedly, Pace Large 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 Pace Large will offset losses from the drop in Pace Large'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 |
| Pace Large vs. Us Government Plus | Pace Large vs. Virtus Seix Government | Pace Large vs. Dunham Porategovernment Bond | Pace Large vs. Dreyfus Government Cash |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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