Correlation Between Legg Mason and Federated Institutional
Can any of the company-specific risk be diversified away by investing in both Legg Mason and Federated Institutional 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 Federated Institutional into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Legg Mason Partners and Federated Institutional High, you can compare the effects of market volatilities on Legg Mason and Federated Institutional 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 Federated Institutional. Check out your portfolio center. Please also check ongoing floating volatility patterns of Legg Mason and Federated Institutional.
Diversification Opportunities for Legg Mason and Federated Institutional
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Legg and FEDERATED is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Legg Mason Partners and Federated Institutional High in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federated Institutional 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 Partners are associated (or correlated) with Federated Institutional. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federated Institutional has no effect on the direction of Legg Mason i.e., Legg Mason and Federated Institutional go up and down completely randomly.
Pair Corralation between Legg Mason and Federated Institutional
Assuming the 90 days trading horizon Legg Mason Partners is expected to generate 4.74 times more return on investment than Federated Institutional. However, Legg Mason is 4.74 times more volatile than Federated Institutional High. It trades about 0.33 of its potential returns per unit of risk. Federated Institutional High is currently generating about 0.12 per unit of risk. If you would invest 1,546 in Legg Mason Partners on September 1, 2024 and sell it today you would earn a total of 67.00 from holding Legg Mason Partners or generate 4.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Legg Mason Partners vs. Federated Institutional High
Performance |
| Timeline |
| Legg Mason Partners |
| Federated Institutional |
Legg Mason and Federated Institutional Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Legg Mason and Federated Institutional
The main advantage of trading using opposite Legg Mason and Federated Institutional positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Legg Mason position performs unexpectedly, Federated Institutional 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 Federated Institutional will offset losses from the drop in Federated Institutional's long position.| Legg Mason vs. Vanguard Total Stock | Legg Mason vs. Vanguard 500 Index | Legg Mason vs. Vanguard Total Stock | Legg Mason vs. Vanguard Total Stock |
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 Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
Other Complementary Tools
| Pattern Recognition Use different Pattern Recognition models to time the market across multiple global exchanges | |
| Commodity Directory Find actively traded commodities issued by global exchanges | |
| Investing Opportunities Build portfolios using our predefined set of ideas and optimize them against your investing preferences | |
| My Watchlist Analysis Analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like | |
| Equity Valuation Check real value of public entities based on technical and fundamental data |