Correlation Between Legg Mason and Aquila Tax-free
Can any of the company-specific risk be diversified away by investing in both Legg Mason and Aquila Tax-free 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 Aquila Tax-free 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 Aquila Tax Free Trust, you can compare the effects of market volatilities on Legg Mason and Aquila Tax-free 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 Aquila Tax-free. Check out your portfolio center. Please also check ongoing floating volatility patterns of Legg Mason and Aquila Tax-free.
Diversification Opportunities for Legg Mason and Aquila Tax-free
-0.41 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Legg and Aquila is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Legg Mason Bw and Aquila Tax Free Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aquila Tax Free 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 Aquila Tax-free. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aquila Tax Free has no effect on the direction of Legg Mason i.e., Legg Mason and Aquila Tax-free go up and down completely randomly.
Pair Corralation between Legg Mason and Aquila Tax-free
Assuming the 90 days horizon Legg Mason Bw is expected to generate 5.11 times more return on investment than Aquila Tax-free. However, Legg Mason is 5.11 times more volatile than Aquila Tax Free Trust. It trades about 0.08 of its potential returns per unit of risk. Aquila Tax Free Trust is currently generating about 0.05 per unit of risk. If you would invest 1,789 in Legg Mason Bw on September 3, 2024 and sell it today you would earn a total of 591.00 from holding Legg Mason Bw or generate 33.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Legg Mason Bw vs. Aquila Tax Free Trust
Performance |
| Timeline |
| Legg Mason Bw |
| Aquila Tax Free |
Legg Mason and Aquila Tax-free Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Legg Mason and Aquila Tax-free
The main advantage of trading using opposite Legg Mason and Aquila Tax-free positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Legg Mason position performs unexpectedly, Aquila Tax-free 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 Aquila Tax-free will offset losses from the drop in Aquila Tax-free'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 |
| Aquila Tax-free vs. Us Government Securities | Aquila Tax-free vs. Ab Government Exchange | Aquila Tax-free vs. Dunham Porategovernment Bond | Aquila Tax-free vs. Us Government Securities |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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