Correlation Between Legg Mason and Lord Abbett
Can any of the company-specific risk be diversified away by investing in both Legg Mason and Lord Abbett 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 Lord Abbett 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 Lord Abbett Short, you can compare the effects of market volatilities on Legg Mason and Lord Abbett 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 Lord Abbett. Check out your portfolio center. Please also check ongoing floating volatility patterns of Legg Mason and Lord Abbett.
Diversification Opportunities for Legg Mason and Lord Abbett
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Legg and Lord is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Legg Mason Global and Lord Abbett Short in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lord Abbett Short 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 Lord Abbett. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lord Abbett Short has no effect on the direction of Legg Mason i.e., Legg Mason and Lord Abbett go up and down completely randomly.
Pair Corralation between Legg Mason and Lord Abbett
Assuming the 90 days horizon Legg Mason Global is expected to generate 1.18 times more return on investment than Lord Abbett. However, Legg Mason is 1.18 times more volatile than Lord Abbett Short. It trades about 0.09 of its potential returns per unit of risk. Lord Abbett Short is currently generating about 0.06 per unit of risk. If you would invest 914.00 in Legg Mason Global on November 6, 2024 and sell it today you would earn a total of 12.00 from holding Legg Mason Global or generate 1.31% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Legg Mason Global vs. Lord Abbett Short
Performance |
| Timeline |
| Legg Mason Global |
| Lord Abbett Short |
Legg Mason and Lord Abbett Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Legg Mason and Lord Abbett
The main advantage of trading using opposite Legg Mason and Lord Abbett positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Legg Mason position performs unexpectedly, Lord Abbett 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 Lord Abbett will offset losses from the drop in Lord Abbett's long position.| Legg Mason vs. Hennessy Bp Energy | Legg Mason vs. Short Oil Gas | Legg Mason vs. Salient Mlp Energy | Legg Mason vs. Adams Natural Resources |
| Lord Abbett vs. Gabelli Global Financial | Lord Abbett vs. Financials Ultrasector Profund | Lord Abbett vs. Rmb Mendon Financial | Lord Abbett vs. Mesirow Financial Small |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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