Correlation Between Legg Mason and Floating Rate
Can any of the company-specific risk be diversified away by investing in both Legg Mason and Floating Rate 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 Floating Rate 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 Floating Rate Fund, you can compare the effects of market volatilities on Legg Mason and Floating Rate 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 Floating Rate. Check out your portfolio center. Please also check ongoing floating volatility patterns of Legg Mason and Floating Rate.
Diversification Opportunities for Legg Mason and Floating Rate
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Legg and Floating is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Legg Mason Bw and Floating Rate Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Floating Rate 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 Floating Rate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Floating Rate has no effect on the direction of Legg Mason i.e., Legg Mason and Floating Rate go up and down completely randomly.
Pair Corralation between Legg Mason and Floating Rate
Assuming the 90 days horizon Legg Mason Bw is expected to generate 22.53 times more return on investment than Floating Rate. However, Legg Mason is 22.53 times more volatile than Floating Rate Fund. It trades about 0.35 of its potential returns per unit of risk. Floating Rate Fund is currently generating about 0.41 per unit of risk. If you would invest 2,221 in Legg Mason Bw on September 3, 2024 and sell it today you would earn a total of 159.00 from holding Legg Mason Bw or generate 7.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Legg Mason Bw vs. Floating Rate Fund
Performance |
| Timeline |
| Legg Mason Bw |
| Floating Rate |
Legg Mason and Floating Rate Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Legg Mason and Floating Rate
The main advantage of trading using opposite Legg Mason and Floating Rate positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Legg Mason position performs unexpectedly, Floating Rate 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 Floating Rate will offset losses from the drop in Floating Rate's long position.| Legg Mason vs. Ultramid Cap Profund Ultramid Cap | Legg Mason vs. Hennessy Nerstone Mid | Legg Mason vs. Boston Partners Small | Legg Mason vs. Fpa Queens Road |
| Floating Rate vs. James Balanced Golden | Floating Rate vs. Global Gold Fund | Floating Rate vs. Europac Gold Fund | Floating Rate vs. Goldman Sachs Short |
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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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