Correlation Between Legg Mason and Schwab Target
Can any of the company-specific risk be diversified away by investing in both Legg Mason and Schwab Target 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 Schwab Target 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 Schwab Target 2055, you can compare the effects of market volatilities on Legg Mason and Schwab Target 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 Schwab Target. Check out your portfolio center. Please also check ongoing floating volatility patterns of Legg Mason and Schwab Target.
Diversification Opportunities for Legg Mason and Schwab Target
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Legg and Schwab is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Legg Mason Partners and Schwab Target 2055 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Schwab Target 2055 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 Schwab Target. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Schwab Target 2055 has no effect on the direction of Legg Mason i.e., Legg Mason and Schwab Target go up and down completely randomly.
Pair Corralation between Legg Mason and Schwab Target
Assuming the 90 days trading horizon Legg Mason Partners is expected to generate 1.1 times more return on investment than Schwab Target. However, Legg Mason is 1.1 times more volatile than Schwab Target 2055. It trades about 0.33 of its potential returns per unit of risk. Schwab Target 2055 is currently generating about 0.34 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 | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Legg Mason Partners vs. Schwab Target 2055
Performance |
| Timeline |
| Legg Mason Partners |
| Schwab Target 2055 |
Legg Mason and Schwab Target Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Legg Mason and Schwab Target
The main advantage of trading using opposite Legg Mason and Schwab Target positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Legg Mason position performs unexpectedly, Schwab Target 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 Schwab Target will offset losses from the drop in Schwab Target'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 |
| Schwab Target vs. Laudus Large Cap | Schwab Target vs. Schwab Target 2010 | Schwab Target vs. Schwab California Tax Free | Schwab Target vs. Schwab Markettrack Servative |
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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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