Correlation Between Arrow Managed and Legg Mason
Can any of the company-specific risk be diversified away by investing in both Arrow Managed and Legg Mason 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 Arrow Managed and Legg Mason into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Arrow Managed Futures and Legg Mason Bw, you can compare the effects of market volatilities on Arrow Managed and Legg Mason 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 Arrow Managed with a short position of Legg Mason. Check out your portfolio center. Please also check ongoing floating volatility patterns of Arrow Managed and Legg Mason.
Diversification Opportunities for Arrow Managed and Legg Mason
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Arrow and Legg is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Arrow Managed Futures and Legg Mason Bw in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Legg Mason Bw and Arrow Managed 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 Arrow Managed Futures are associated (or correlated) with Legg Mason. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Legg Mason Bw has no effect on the direction of Arrow Managed i.e., Arrow Managed and Legg Mason go up and down completely randomly.
Pair Corralation between Arrow Managed and Legg Mason
Assuming the 90 days horizon Arrow Managed Futures is expected to generate 2.22 times more return on investment than Legg Mason. However, Arrow Managed is 2.22 times more volatile than Legg Mason Bw. It trades about 0.33 of its potential returns per unit of risk. Legg Mason Bw is currently generating about -0.01 per unit of risk. If you would invest 524.00 in Arrow Managed Futures on September 5, 2024 and sell it today you would earn a total of 45.00 from holding Arrow Managed Futures or generate 8.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Arrow Managed Futures vs. Legg Mason Bw
Performance |
| Timeline |
| Arrow Managed Futures |
| Legg Mason Bw |
Arrow Managed and Legg Mason Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Arrow Managed and Legg Mason
The main advantage of trading using opposite Arrow Managed and Legg Mason positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Arrow Managed position performs unexpectedly, Legg Mason 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 Legg Mason will offset losses from the drop in Legg Mason's long position.| Arrow Managed vs. Arrow Managed Futures | Arrow Managed vs. Arrow Managed Futures | Arrow Managed vs. Arrow Dwa Balanced | Arrow Managed vs. Arrow Dwa Balanced |
| Legg Mason vs. Franklin Mutual Beacon | Legg Mason vs. Templeton Developing Markets | Legg Mason vs. Franklin Mutual Global | Legg Mason vs. Franklin Mutual Global |
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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