Correlation Between Legg Mason and Rational Real
Can any of the company-specific risk be diversified away by investing in both Legg Mason and Rational Real 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 Rational Real 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 Rational Real Strategies, you can compare the effects of market volatilities on Legg Mason and Rational Real 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 Rational Real. Check out your portfolio center. Please also check ongoing floating volatility patterns of Legg Mason and Rational Real.
Diversification Opportunities for Legg Mason and Rational Real
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Legg and RATIONAL is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Legg Mason Bw and Rational Real Strategies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rational Real Strategies 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 Rational Real. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rational Real Strategies has no effect on the direction of Legg Mason i.e., Legg Mason and Rational Real go up and down completely randomly.
Pair Corralation between Legg Mason and Rational Real
Assuming the 90 days horizon Legg Mason Bw is expected to generate 16.48 times more return on investment than Rational Real. However, Legg Mason is 16.48 times more volatile than Rational Real Strategies. It trades about 0.31 of its potential returns per unit of risk. Rational Real Strategies is currently generating about 0.42 per unit of risk. If you would invest 2,195 in Legg Mason Bw on September 1, 2024 and sell it today you would earn a total of 147.00 from holding Legg Mason Bw or generate 6.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Legg Mason Bw vs. Rational Real Strategies
Performance |
| Timeline |
| Legg Mason Bw |
| Rational Real Strategies |
Legg Mason and Rational Real Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Legg Mason and Rational Real
The main advantage of trading using opposite Legg Mason and Rational Real positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Legg Mason position performs unexpectedly, Rational Real 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 Rational Real will offset losses from the drop in Rational Real's long position.| Legg Mason vs. Icon Financial Fund | Legg Mason vs. Transamerica Financial Life | Legg Mason vs. Royce Global Financial | Legg Mason vs. Vanguard Financials Index |
| Rational Real vs. Saat Moderate Strategy | Rational Real vs. Franklin Lifesmart Retirement | Rational Real vs. Pro Blend Moderate Term | Rational Real vs. Dimensional Retirement Income |
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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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