Correlation Between Legg Mason and Baird Municipal
Can any of the company-specific risk be diversified away by investing in both Legg Mason and Baird Municipal 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 Baird Municipal 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 Baird Municipal Bond, you can compare the effects of market volatilities on Legg Mason and Baird Municipal 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 Baird Municipal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Legg Mason and Baird Municipal.
Diversification Opportunities for Legg Mason and Baird Municipal
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Legg and Baird is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Legg Mason Global and Baird Municipal Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baird Municipal Bond 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 Baird Municipal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Baird Municipal Bond has no effect on the direction of Legg Mason i.e., Legg Mason and Baird Municipal go up and down completely randomly.
Pair Corralation between Legg Mason and Baird Municipal
Assuming the 90 days horizon Legg Mason is expected to generate 1.04 times less return on investment than Baird Municipal. In addition to that, Legg Mason is 1.79 times more volatile than Baird Municipal Bond. It trades about 0.26 of its total potential returns per unit of risk. Baird Municipal Bond is currently generating about 0.49 per unit of volatility. If you would invest 998.00 in Baird Municipal Bond on September 13, 2024 and sell it today you would earn a total of 11.00 from holding Baird Municipal Bond or generate 1.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Legg Mason Global vs. Baird Municipal Bond
Performance |
| Timeline |
| Legg Mason Global |
| Baird Municipal Bond |
Legg Mason and Baird Municipal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Legg Mason and Baird Municipal
The main advantage of trading using opposite Legg Mason and Baird Municipal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Legg Mason position performs unexpectedly, Baird Municipal 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 Baird Municipal will offset losses from the drop in Baird Municipal'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 |
| Baird Municipal vs. Dws Government Money | Baird Municipal vs. Ambrus Core Bond | Baird Municipal vs. Pace High Yield | Baird Municipal vs. Western Asset Municipal |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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