Correlation Between Legg Mason and Scout Small
Can any of the company-specific risk be diversified away by investing in both Legg Mason and Scout Small 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 Scout Small 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 Scout Small Cap, you can compare the effects of market volatilities on Legg Mason and Scout Small 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 Scout Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Legg Mason and Scout Small.
Diversification Opportunities for Legg Mason and Scout Small
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Legg and Scout is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Legg Mason Partners and Scout Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Scout Small Cap 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 Scout Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Scout Small Cap has no effect on the direction of Legg Mason i.e., Legg Mason and Scout Small go up and down completely randomly.
Pair Corralation between Legg Mason and Scout Small
Assuming the 90 days trading horizon Legg Mason Partners is expected to generate 0.41 times more return on investment than Scout Small. However, Legg Mason Partners is 2.44 times less risky than Scout Small. It trades about 0.17 of its potential returns per unit of risk. Scout Small Cap is currently generating about 0.05 per unit of risk. If you would invest 1,604 in Legg Mason Partners on September 13, 2024 and sell it today you would earn a total of 27.00 from holding Legg Mason Partners or generate 1.68% 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. Scout Small Cap
Performance |
| Timeline |
| Legg Mason Partners |
| Scout Small Cap |
Legg Mason and Scout Small Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Legg Mason and Scout Small
The main advantage of trading using opposite Legg Mason and Scout Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Legg Mason position performs unexpectedly, Scout Small 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 Scout Small will offset losses from the drop in Scout Small's long position.| Legg Mason vs. Aqr Diversified Arbitrage | Legg Mason vs. Lord Abbett Diversified | Legg Mason vs. Western Asset Diversified | Legg Mason vs. Blackrock Conservative Prprdptfinstttnl |
| Scout Small vs. Carillon Chartwell Short | Scout Small vs. Chartwell Short Duration | Scout Small vs. Carillon Chartwell Short | Scout Small vs. Eagle Growth Income |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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