Correlation Between Legg Mason and Precious Metals
Can any of the company-specific risk be diversified away by investing in both Legg Mason and Precious Metals 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 Precious Metals 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 Precious Metals Ultrasector, you can compare the effects of market volatilities on Legg Mason and Precious Metals 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 Precious Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Legg Mason and Precious Metals.
Diversification Opportunities for Legg Mason and Precious Metals
-0.35 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Legg and Precious is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Legg Mason Bw and Precious Metals Ultrasector in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Precious Metals Ultr 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 Precious Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Precious Metals Ultr has no effect on the direction of Legg Mason i.e., Legg Mason and Precious Metals go up and down completely randomly.
Pair Corralation between Legg Mason and Precious Metals
Assuming the 90 days horizon Legg Mason Bw is expected to generate 0.28 times more return on investment than Precious Metals. However, Legg Mason Bw is 3.63 times less risky than Precious Metals. It trades about 0.16 of its potential returns per unit of risk. Precious Metals Ultrasector is currently generating about 0.03 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 331.00 from holding Legg Mason Bw or generate 16.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Legg Mason Bw vs. Precious Metals Ultrasector
Performance |
| Timeline |
| Legg Mason Bw |
| Precious Metals Ultr |
Legg Mason and Precious Metals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Legg Mason and Precious Metals
The main advantage of trading using opposite Legg Mason and Precious Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Legg Mason position performs unexpectedly, Precious Metals 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 Precious Metals will offset losses from the drop in Precious Metals' 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 |
| Precious Metals vs. Semiconductor Ultrasector Profund | Precious Metals vs. Pharmaceuticals Ultrasector Profund |
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 Directory module to find actively traded commodities issued by global exchanges.
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