Correlation Between Legg Mason and Strategic Income
Can any of the company-specific risk be diversified away by investing in both Legg Mason and Strategic 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 Strategic Income into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Legg Mason Bw and Strategic Income Opportunities, you can compare the effects of market volatilities on Legg Mason and Strategic 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 Strategic Income. Check out your portfolio center. Please also check ongoing floating volatility patterns of Legg Mason and Strategic Income.
Diversification Opportunities for Legg Mason and Strategic Income
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Legg and Strategic is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Legg Mason Bw and Strategic Income Opportunities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Strategic Income Opp 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 Bw are associated (or correlated) with Strategic Income. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Strategic Income Opp has no effect on the direction of Legg Mason i.e., Legg Mason and Strategic Income go up and down completely randomly.
Pair Corralation between Legg Mason and Strategic Income
Assuming the 90 days horizon Legg Mason is expected to generate 2.46 times less return on investment than Strategic Income. In addition to that, Legg Mason is 1.84 times more volatile than Strategic Income Opportunities. It trades about 0.02 of its total potential returns per unit of risk. Strategic Income Opportunities is currently generating about 0.08 per unit of volatility. If you would invest 909.00 in Strategic Income Opportunities on August 26, 2024 and sell it today you would earn a total of 95.00 from holding Strategic Income Opportunities or generate 10.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Legg Mason Bw vs. Strategic Income Opportunities
Performance |
| Timeline |
| Legg Mason Bw |
| Strategic Income Opp |
Legg Mason and Strategic Income Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Legg Mason and Strategic Income
The main advantage of trading using opposite Legg Mason and Strategic Income positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Legg Mason position performs unexpectedly, Strategic 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 Strategic Income will offset losses from the drop in Strategic Income's long position.| Legg Mason vs. Franklin Mutual Beacon | Legg Mason vs. Templeton Developing Markets | Legg Mason vs. Franklin Mutual Global | Legg Mason vs. Franklin Mutual Global |
| Strategic Income vs. Regional Bank Fund | Strategic Income vs. Regional Bank Fund | Strategic Income vs. Multimanager Lifestyle Moderate | Strategic Income vs. Multimanager Lifestyle Balanced |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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