Correlation Between Pace Large and Legg Mason
Can any of the company-specific risk be diversified away by investing in both Pace Large 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 Pace Large and Legg Mason into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pace Large Growth and Legg Mason Bw, you can compare the effects of market volatilities on Pace Large 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 Pace Large with a short position of Legg Mason. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pace Large and Legg Mason.
Diversification Opportunities for Pace Large and Legg Mason
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Pace and Legg is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Pace Large Growth 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 Pace Large 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 Pace Large Growth 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 Pace Large i.e., Pace Large and Legg Mason go up and down completely randomly.
Pair Corralation between Pace Large and Legg Mason
Assuming the 90 days horizon Pace Large is expected to generate 1.49 times less return on investment than Legg Mason. In addition to that, Pace Large is 2.35 times more volatile than Legg Mason Bw. It trades about 0.01 of its total potential returns per unit of risk. Legg Mason Bw is currently generating about 0.03 per unit of volatility. If you would invest 1,989 in Legg Mason Bw on August 24, 2024 and sell it today you would earn a total of 281.00 from holding Legg Mason Bw or generate 14.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Pace Large Growth vs. Legg Mason Bw
Performance |
| Timeline |
| Pace Large Growth |
| Legg Mason Bw |
Pace Large and Legg Mason Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pace Large and Legg Mason
The main advantage of trading using opposite Pace Large and Legg Mason positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pace Large 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.| Pace Large vs. HUMANA INC | Pace Large vs. Aquagold International | Pace Large vs. Barloworld Ltd ADR | Pace Large vs. Morningstar Unconstrained Allocation |
| Legg Mason vs. Allianzgi Health Sciences | Legg Mason vs. Highland Longshort Healthcare | Legg Mason vs. Tekla Healthcare Opportunities | Legg Mason vs. Hartford Healthcare Hls |
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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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