Correlation Between Legg Mason and IShares Core
Can any of the company-specific risk be diversified away by investing in both Legg Mason and IShares Core 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 IShares Core into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Legg Mason Low and iShares Core SP, you can compare the effects of market volatilities on Legg Mason and IShares Core 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 IShares Core. Check out your portfolio center. Please also check ongoing floating volatility patterns of Legg Mason and IShares Core.
Diversification Opportunities for Legg Mason and IShares Core
0.51 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Legg and IShares is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Legg Mason Low and iShares Core SP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Core SP 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 Low are associated (or correlated) with IShares Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Core SP has no effect on the direction of Legg Mason i.e., Legg Mason and IShares Core go up and down completely randomly.
Pair Corralation between Legg Mason and IShares Core
Given the investment horizon of 90 days Legg Mason is expected to generate 1.47 times less return on investment than IShares Core. But when comparing it to its historical volatility, Legg Mason Low is 1.68 times less risky than IShares Core. It trades about 0.36 of its potential returns per unit of risk. iShares Core SP is currently generating about 0.31 of returns per unit of risk over similar time horizon. If you would invest 13,086 in iShares Core SP on September 1, 2024 and sell it today you would earn a total of 814.00 from holding iShares Core SP or generate 6.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Legg Mason Low vs. iShares Core SP
Performance |
| Timeline |
| Legg Mason Low |
| iShares Core SP |
Legg Mason and IShares Core Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Legg Mason and IShares Core
The main advantage of trading using opposite Legg Mason and IShares Core positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Legg Mason position performs unexpectedly, IShares Core 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 IShares Core will offset losses from the drop in IShares Core's long position.| Legg Mason vs. iShares Core SP | Legg Mason vs. iShares Core MSCI | Legg Mason vs. iShares Broad USD | Legg Mason vs. iShares Core SP |
| IShares Core vs. iShares Core SP | IShares Core vs. iShares Core SP | IShares Core vs. iShares Russell Top | IShares Core vs. iShares Core MSCI |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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