Correlation Between Principal Lifetime and Legg Mason
Can any of the company-specific risk be diversified away by investing in both Principal Lifetime 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 Principal Lifetime and Legg Mason into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Principal Lifetime Hybrid and Legg Mason Bw, you can compare the effects of market volatilities on Principal Lifetime 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 Principal Lifetime with a short position of Legg Mason. Check out your portfolio center. Please also check ongoing floating volatility patterns of Principal Lifetime and Legg Mason.
Diversification Opportunities for Principal Lifetime and Legg Mason
0.32 | Correlation Coefficient |
Weak diversification
The 3 months correlation between PRINCIPAL and Legg is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Principal Lifetime Hybrid 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 Principal Lifetime 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 Principal Lifetime Hybrid 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 Principal Lifetime i.e., Principal Lifetime and Legg Mason go up and down completely randomly.
Pair Corralation between Principal Lifetime and Legg Mason
Assuming the 90 days horizon Principal Lifetime is expected to generate 2.93 times less return on investment than Legg Mason. But when comparing it to its historical volatility, Principal Lifetime Hybrid is 2.37 times less risky than Legg Mason. It trades about 0.13 of its potential returns per unit of risk. Legg Mason Bw is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 2,039 in Legg Mason Bw on September 2, 2024 and sell it today you would earn a total of 349.00 from holding Legg Mason Bw or generate 17.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Principal Lifetime Hybrid vs. Legg Mason Bw
Performance |
| Timeline |
| Principal Lifetime Hybrid |
| Legg Mason Bw |
Principal Lifetime and Legg Mason Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Principal Lifetime and Legg Mason
The main advantage of trading using opposite Principal Lifetime and Legg Mason positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Principal Lifetime 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.| Principal Lifetime vs. Transamerica Intermediate Muni | Principal Lifetime vs. Calamos Short Term Bond | Principal Lifetime vs. Artisan High Income | Principal Lifetime vs. Federated Ohio Municipal |
| Legg Mason vs. Clearbridge Aggressive Growth | Legg Mason vs. Clearbridge Small Cap | Legg Mason vs. Qs International Equity | Legg Mason vs. Clearbridge Appreciation Fund |
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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.
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