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
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between PRINCIPAL and Legg is 0.85. 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 1.09 times less return on investment than Legg Mason. In addition to that, Principal Lifetime is 1.04 times more volatile than Legg Mason Bw. It trades about 0.07 of its total potential returns per unit of risk. Legg Mason Bw is currently generating about 0.08 per unit of volatility. If you would invest 1,792 in Legg Mason Bw on September 3, 2024 and sell it today you would earn a total of 582.00 from holding Legg Mason Bw or generate 32.48% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| 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. American Funds 2060 | Principal Lifetime vs. American Funds 2060 | Principal Lifetime vs. American Funds 2060 | Principal Lifetime vs. T Rowe Price |
| Legg Mason vs. Vanguard Value Index | Legg Mason vs. Dodge Cox Stock | Legg Mason vs. American Funds American | Legg Mason vs. American Funds American |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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