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 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 0.97 times more return on investment than Tax Managed. However, Legg Mason Bw is 1.03 times less risky than Tax Managed. It trades about 0.15 of its potential returns per unit of risk. Tax Managed Large Cap is currently generating about 0.14 per unit of risk. If you would invest 1,803 in Legg Mason Bw on September 4, 2024 and sell it today you would earn a total of 562.00 from holding Legg Mason Bw or generate 31.17% 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. Lord Abbett Diversified | Legg Mason vs. Legg Mason Bw | Legg Mason vs. Wasatch Small Cap | Legg Mason vs. Small Cap Stock |
| Tax Managed vs. Dunham Real Estate | Tax Managed vs. Jhancock Real Estate | Tax Managed vs. Great West Real Estate | Tax Managed vs. Columbia Real Estate |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
Other Complementary Tools
| Bollinger Bands Use Bollinger Bands indicator to analyze target price for a given investing horizon | |
| Volatility Analysis Get historical volatility and risk analysis based on latest market data | |
| Correlation Analysis Reduce portfolio risk simply by holding instruments which are not perfectly correlated | |
| ETFs Find actively traded Exchange Traded Funds (ETF) from around the world | |
| FinTech Suite Use AI to screen and filter profitable investment opportunities |