Correlation Between Legg Mason and Tax-managed
Can any of the company-specific risk be diversified away by investing in both Legg Mason and Tax-managed 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 Tax-managed 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 Tax Managed Large Cap, you can compare the effects of market volatilities on Legg Mason and Tax-managed 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 Tax-managed. Check out your portfolio center. Please also check ongoing floating volatility patterns of Legg Mason and Tax-managed.
Diversification Opportunities for Legg Mason and Tax-managed
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Legg and Tax-managed is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Legg Mason Bw and Tax Managed Large Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tax Managed Large 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 Tax-managed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tax Managed Large has no effect on the direction of Legg Mason i.e., Legg Mason and Tax-managed go up and down completely randomly.
Pair Corralation between Legg Mason and Tax-managed
Assuming the 90 days horizon Legg Mason Bw is expected to generate 1.19 times more return on investment than Tax-managed. However, Legg Mason is 1.19 times more volatile than Tax Managed Large Cap. It trades about 0.28 of its potential returns per unit of risk. Tax Managed Large Cap is currently generating about 0.19 per unit of risk. If you would invest 2,243 in Legg Mason Bw on August 31, 2024 and sell it today you would earn a total of 141.00 from holding Legg Mason Bw or generate 6.29% 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. Tax Managed Large Cap
Performance |
| Timeline |
| Legg Mason Bw |
| Tax Managed Large |
Legg Mason and Tax-managed Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Legg Mason and Tax-managed
The main advantage of trading using opposite Legg Mason and Tax-managed positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Legg Mason position performs unexpectedly, Tax-managed 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 Tax-managed will offset losses from the drop in Tax-managed's long position.| Legg Mason vs. Vanguard Value Index | Legg Mason vs. Dodge Cox Stock | Legg Mason vs. American Mutual Fund | Legg Mason vs. American Funds American |
| Tax-managed vs. Blackrock Exchange Portfolio | Tax-managed vs. T Rowe Price | Tax-managed vs. Transamerica Funds | Tax-managed vs. Chestnut Street Exchange |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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