Correlation Between Legg Mason and Elfun Income
Can any of the company-specific risk be diversified away by investing in both Legg Mason and Elfun Income 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 Elfun Income 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 Elfun Income Fund, you can compare the effects of market volatilities on Legg Mason and Elfun Income 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 Elfun Income. Check out your portfolio center. Please also check ongoing floating volatility patterns of Legg Mason and Elfun Income.
Diversification Opportunities for Legg Mason and Elfun Income
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Legg and Elfun is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Legg Mason Global and Elfun Income Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Elfun Income 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 Elfun Income. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Elfun Income has no effect on the direction of Legg Mason i.e., Legg Mason and Elfun Income go up and down completely randomly.
Pair Corralation between Legg Mason and Elfun Income
Assuming the 90 days horizon Legg Mason Global is expected to generate 0.68 times more return on investment than Elfun Income. However, Legg Mason Global is 1.46 times less risky than Elfun Income. It trades about 0.21 of its potential returns per unit of risk. Elfun Income Fund is currently generating about 0.09 per unit of risk. If you would invest 948.00 in Legg Mason Global on September 4, 2024 and sell it today you would earn a total of 11.00 from holding Legg Mason Global or generate 1.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.24% |
| Values | Daily Returns |
Legg Mason Global vs. Elfun Income Fund
Performance |
| Timeline |
| Legg Mason Global |
| Elfun Income |
Legg Mason and Elfun Income Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Legg Mason and Elfun Income
The main advantage of trading using opposite Legg Mason and Elfun Income positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Legg Mason position performs unexpectedly, Elfun Income 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 Elfun Income will offset losses from the drop in Elfun Income's long position.| Legg Mason vs. Invesco Global Health | Legg Mason vs. Baron Health Care | Legg Mason vs. Deutsche Health And | Legg Mason vs. Fidelity Advisor Health |
| Elfun Income vs. State Street Target | Elfun Income vs. State Street Target | Elfun Income vs. Ssga International Stock | Elfun Income vs. State Street Target |
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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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