Correlation Between Legg Mason and Columbia Select
Can any of the company-specific risk be diversified away by investing in both Legg Mason and Columbia Select 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 Columbia Select 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 Columbia Select Smaller Cap, you can compare the effects of market volatilities on Legg Mason and Columbia Select 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 Columbia Select. Check out your portfolio center. Please also check ongoing floating volatility patterns of Legg Mason and Columbia Select.
Diversification Opportunities for Legg Mason and Columbia Select
0.43 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Legg and Columbia is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Legg Mason Global and Columbia Select Smaller Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Columbia Select Smaller 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 Columbia Select. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Columbia Select Smaller has no effect on the direction of Legg Mason i.e., Legg Mason and Columbia Select go up and down completely randomly.
Pair Corralation between Legg Mason and Columbia Select
Assuming the 90 days horizon Legg Mason is expected to generate 21.43 times less return on investment than Columbia Select. But when comparing it to its historical volatility, Legg Mason Global is 4.15 times less risky than Columbia Select. It trades about 0.03 of its potential returns per unit of risk. Columbia Select Smaller Cap is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 1,755 in Columbia Select Smaller Cap on October 21, 2024 and sell it today you would earn a total of 42.00 from holding Columbia Select Smaller Cap or generate 2.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Legg Mason Global vs. Columbia Select Smaller Cap
Performance |
| Timeline |
| Legg Mason Global |
| Columbia Select Smaller |
Legg Mason and Columbia Select Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Legg Mason and Columbia Select
The main advantage of trading using opposite Legg Mason and Columbia Select positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Legg Mason position performs unexpectedly, Columbia Select 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 Columbia Select will offset losses from the drop in Columbia Select's long position.| Legg Mason vs. Gamco Global Gold | Legg Mason vs. Precious Metals And | Legg Mason vs. World Precious Minerals | Legg Mason vs. Global Gold Fund |
| Columbia Select vs. Columbia Ultra Short | Columbia Select vs. Columbia Integrated Large | Columbia Select vs. Columbia Integrated Large | Columbia Select vs. Columbia Integrated Large |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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