Correlation Between Legg Mason and Eafe Choice
Can any of the company-specific risk be diversified away by investing in both Legg Mason and Eafe Choice 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 Eafe Choice 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 The Eafe Choice, you can compare the effects of market volatilities on Legg Mason and Eafe Choice 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 Eafe Choice. Check out your portfolio center. Please also check ongoing floating volatility patterns of Legg Mason and Eafe Choice.
Diversification Opportunities for Legg Mason and Eafe Choice
0.59 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Legg and Eafe is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Legg Mason Global and The Eafe Choice in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eafe Choice 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 Eafe Choice. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eafe Choice has no effect on the direction of Legg Mason i.e., Legg Mason and Eafe Choice go up and down completely randomly.
Pair Corralation between Legg Mason and Eafe Choice
Assuming the 90 days horizon Legg Mason Global is expected to generate 0.23 times more return on investment than Eafe Choice. However, Legg Mason Global is 4.44 times less risky than Eafe Choice. It trades about -0.03 of its potential returns per unit of risk. The Eafe Choice is currently generating about -0.01 per unit of risk. If you would invest 963.00 in Legg Mason Global on September 12, 2024 and sell it today you would lose (4.00) from holding Legg Mason Global or give up 0.42% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Legg Mason Global vs. The Eafe Choice
Performance |
| Timeline |
| Legg Mason Global |
| Eafe Choice |
Legg Mason and Eafe Choice Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Legg Mason and Eafe Choice
The main advantage of trading using opposite Legg Mason and Eafe Choice positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Legg Mason position performs unexpectedly, Eafe Choice 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 Eafe Choice will offset losses from the drop in Eafe Choice's long position.| Legg Mason vs. Calamos Global Equity | Legg Mason vs. Gmo Global Equity | Legg Mason vs. Qs Global Equity | Legg Mason vs. Touchstone International Equity |
| Eafe Choice vs. Qs Large Cap | Eafe Choice vs. Fisher Large Cap | Eafe Choice vs. T Rowe Price | Eafe Choice vs. Morningstar Unconstrained Allocation |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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