Correlation Between Legg Mason and Government Securities
Can any of the company-specific risk be diversified away by investing in both Legg Mason and Government Securities 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 Government Securities 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 Government Securities Fund, you can compare the effects of market volatilities on Legg Mason and Government Securities 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 Government Securities. Check out your portfolio center. Please also check ongoing floating volatility patterns of Legg Mason and Government Securities.
Diversification Opportunities for Legg Mason and Government Securities
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Legg and Government is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Legg Mason Global and Government Securities Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Government Securities 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 Government Securities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Government Securities has no effect on the direction of Legg Mason i.e., Legg Mason and Government Securities go up and down completely randomly.
Pair Corralation between Legg Mason and Government Securities
Assuming the 90 days horizon Legg Mason Global is expected to under-perform the Government Securities. But the mutual fund apears to be less risky and, when comparing its historical volatility, Legg Mason Global is 1.1 times less risky than Government Securities. The mutual fund trades about -0.01 of its potential returns per unit of risk. The Government Securities Fund is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest 875.00 in Government Securities Fund on October 24, 2024 and sell it today you would lose (1.00) from holding Government Securities Fund or give up 0.11% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 98.33% |
| Values | Daily Returns |
Legg Mason Global vs. Government Securities Fund
Performance |
| Timeline |
| Legg Mason Global |
| Government Securities |
Legg Mason and Government Securities Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Legg Mason and Government Securities
The main advantage of trading using opposite Legg Mason and Government Securities positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Legg Mason position performs unexpectedly, Government Securities 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 Government Securities will offset losses from the drop in Government Securities' long position.| Legg Mason vs. Goldman Sachs Mlp | Legg Mason vs. Pimco Energy Tactical | Legg Mason vs. Clearbridge Energy Mlp | Legg Mason vs. Alpsalerian Energy Infrastructure |
| Government Securities vs. Morningstar Global Income | Government Securities vs. Legg Mason Global | Government Securities vs. Tax Managed Large Cap | Government Securities vs. Rbc Funds Trust |
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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.
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