Correlation Between Legg Mason and Gmo Us
Can any of the company-specific risk be diversified away by investing in both Legg Mason and Gmo Us 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 Gmo Us 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 Gmo Small Cap, you can compare the effects of market volatilities on Legg Mason and Gmo Us 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 Gmo Us. Check out your portfolio center. Please also check ongoing floating volatility patterns of Legg Mason and Gmo Us.
Diversification Opportunities for Legg Mason and Gmo Us
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Legg and Gmo is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Legg Mason Bw and Gmo Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gmo Small Cap 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 Gmo Us. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gmo Small Cap has no effect on the direction of Legg Mason i.e., Legg Mason and Gmo Us go up and down completely randomly.
Pair Corralation between Legg Mason and Gmo Us
Assuming the 90 days horizon Legg Mason is expected to generate 1.16 times less return on investment than Gmo Us. But when comparing it to its historical volatility, Legg Mason Bw is 1.77 times less risky than Gmo Us. It trades about 0.17 of its potential returns per unit of risk. Gmo Small Cap is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 1,567 in Gmo Small Cap on August 25, 2024 and sell it today you would earn a total of 710.00 from holding Gmo Small Cap or generate 45.31% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.63% |
| Values | Daily Returns |
Legg Mason Bw vs. Gmo Small Cap
Performance |
| Timeline |
| Legg Mason Bw |
| Gmo Small Cap |
Legg Mason and Gmo Us Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Legg Mason and Gmo Us
The main advantage of trading using opposite Legg Mason and Gmo Us positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Legg Mason position performs unexpectedly, Gmo Us 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 Gmo Us will offset losses from the drop in Gmo Us' long position.| Legg Mason vs. Clearbridge Aggressive Growth | Legg Mason vs. Clearbridge Small Cap | Legg Mason vs. Qs International Equity | Legg Mason vs. Clearbridge Appreciation Fund |
| Gmo Us vs. Federated Mdt Large | Gmo Us vs. Legg Mason Bw | Gmo Us vs. Pace Large Growth | Gmo Us vs. Enhanced Large Pany |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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