Correlation Between Legg Mason and Lgm Risk
Can any of the company-specific risk be diversified away by investing in both Legg Mason and Lgm Risk 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 Lgm Risk 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 Lgm Risk Managed, you can compare the effects of market volatilities on Legg Mason and Lgm Risk 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 Lgm Risk. Check out your portfolio center. Please also check ongoing floating volatility patterns of Legg Mason and Lgm Risk.
Diversification Opportunities for Legg Mason and Lgm Risk
0.99 | Correlation Coefficient |
No risk reduction
The 3 months correlation between Legg and Lgm is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Legg Mason Partners and Lgm Risk Managed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lgm Risk Managed 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 Lgm Risk. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lgm Risk Managed has no effect on the direction of Legg Mason i.e., Legg Mason and Lgm Risk go up and down completely randomly.
Pair Corralation between Legg Mason and Lgm Risk
Assuming the 90 days trading horizon Legg Mason Partners is expected to generate 2.36 times more return on investment than Lgm Risk. However, Legg Mason is 2.36 times more volatile than Lgm Risk Managed. It trades about 0.1 of its potential returns per unit of risk. Lgm Risk Managed is currently generating about 0.14 per unit of risk. If you would invest 1,156 in Legg Mason Partners on September 2, 2024 and sell it today you would earn a total of 466.00 from holding Legg Mason Partners or generate 40.31% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Legg Mason Partners vs. Lgm Risk Managed
Performance |
| Timeline |
| Legg Mason Partners |
| Lgm Risk Managed |
Legg Mason and Lgm Risk Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Legg Mason and Lgm Risk
The main advantage of trading using opposite Legg Mason and Lgm Risk positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Legg Mason position performs unexpectedly, Lgm Risk 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 Lgm Risk will offset losses from the drop in Lgm Risk'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 |
| Lgm Risk vs. Us Vector Equity | Lgm Risk vs. The Gabelli Equity | Lgm Risk vs. Us Strategic Equity | Lgm Risk vs. Sarofim Equity |
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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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