Correlation Between Legg Mason and Deutsche
Can any of the company-specific risk be diversified away by investing in both Legg Mason and Deutsche 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 Deutsche 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 Deutsche Sp 500, you can compare the effects of market volatilities on Legg Mason and Deutsche 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 Deutsche. Check out your portfolio center. Please also check ongoing floating volatility patterns of Legg Mason and Deutsche.
Diversification Opportunities for Legg Mason and Deutsche
0.99 | Correlation Coefficient |
No risk reduction
The 3 months correlation between Legg and Deutsche is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Legg Mason Partners and Deutsche Sp 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Deutsche Sp 500 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 Deutsche. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Deutsche Sp 500 has no effect on the direction of Legg Mason i.e., Legg Mason and Deutsche go up and down completely randomly.
Pair Corralation between Legg Mason and Deutsche
Assuming the 90 days trading horizon Legg Mason is expected to generate 1.21 times less return on investment than Deutsche. But when comparing it to its historical volatility, Legg Mason Partners is 1.2 times less risky than Deutsche. It trades about 0.37 of its potential returns per unit of risk. Deutsche Sp 500 is currently generating about 0.37 of returns per unit of risk over similar time horizon. If you would invest 4,875 in Deutsche Sp 500 on September 3, 2024 and sell it today you would earn a total of 278.00 from holding Deutsche Sp 500 or generate 5.7% 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. Deutsche Sp 500
Performance |
| Timeline |
| Legg Mason Partners |
| Deutsche Sp 500 |
Legg Mason and Deutsche Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Legg Mason and Deutsche
The main advantage of trading using opposite Legg Mason and Deutsche positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Legg Mason position performs unexpectedly, Deutsche 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 Deutsche will offset losses from the drop in Deutsche's long position.| Legg Mason vs. Avantis Large Cap | Legg Mason vs. Qs Large Cap | Legg Mason vs. Americafirst Large Cap | Legg Mason vs. Dana Large Cap |
| Deutsche vs. Vanguard Total Stock | Deutsche vs. Vanguard 500 Index | Deutsche vs. Vanguard Total Stock | Deutsche 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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