Correlation Between Legg Mason and Absolute Convertible
Can any of the company-specific risk be diversified away by investing in both Legg Mason and Absolute Convertible 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 Absolute Convertible into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Legg Mason Global and Absolute Convertible Arbitrage, you can compare the effects of market volatilities on Legg Mason and Absolute Convertible 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 Absolute Convertible. Check out your portfolio center. Please also check ongoing floating volatility patterns of Legg Mason and Absolute Convertible.
Diversification Opportunities for Legg Mason and Absolute Convertible
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Legg and Absolute is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Legg Mason Global and Absolute Convertible Arbitrage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Absolute Convertible 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 Global are associated (or correlated) with Absolute Convertible. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Absolute Convertible has no effect on the direction of Legg Mason i.e., Legg Mason and Absolute Convertible go up and down completely randomly.
Pair Corralation between Legg Mason and Absolute Convertible
Assuming the 90 days horizon Legg Mason Global is expected to generate 1.09 times more return on investment than Absolute Convertible. However, Legg Mason is 1.09 times more volatile than Absolute Convertible Arbitrage. It trades about -0.04 of its potential returns per unit of risk. Absolute Convertible Arbitrage is currently generating about -0.05 per unit of risk. If you would invest 927.00 in Legg Mason Global on October 30, 2024 and sell it today you would lose (3.00) from holding Legg Mason Global or give up 0.32% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Legg Mason Global vs. Absolute Convertible Arbitrage
Performance |
| Timeline |
| Legg Mason Global |
| Absolute Convertible |
Legg Mason and Absolute Convertible Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Legg Mason and Absolute Convertible
The main advantage of trading using opposite Legg Mason and Absolute Convertible positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Legg Mason position performs unexpectedly, Absolute Convertible 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 Absolute Convertible will offset losses from the drop in Absolute Convertible's long position.| Legg Mason vs. Lord Abbett Health | Legg Mason vs. Baron Health Care | Legg Mason vs. Alger Health Sciences | Legg Mason vs. Invesco Global Health |
| Absolute Convertible vs. Morgan Stanley Emerging | Absolute Convertible vs. Artisan Developing World | Absolute Convertible vs. Eagle Mlp Strategy | Absolute Convertible vs. Transamerica Emerging Markets |
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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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