Correlation Between Legg Mason and Gmo Quality
Can any of the company-specific risk be diversified away by investing in both Legg Mason and Gmo Quality 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 Gmo Quality 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 Gmo Quality Fund, you can compare the effects of market volatilities on Legg Mason and Gmo Quality 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 Gmo Quality. Check out your portfolio center. Please also check ongoing floating volatility patterns of Legg Mason and Gmo Quality.
Diversification Opportunities for Legg Mason and Gmo Quality
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Legg and Gmo is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Legg Mason Partners and Gmo Quality Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gmo Quality Fund 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 Gmo Quality. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gmo Quality Fund has no effect on the direction of Legg Mason i.e., Legg Mason and Gmo Quality go up and down completely randomly.
Pair Corralation between Legg Mason and Gmo Quality
Assuming the 90 days trading horizon Legg Mason is expected to generate 1.18 times less return on investment than Gmo Quality. But when comparing it to its historical volatility, Legg Mason Partners is 1.53 times less risky than Gmo Quality. It trades about 0.14 of its potential returns per unit of risk. Gmo Quality Fund is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 3,132 in Gmo Quality Fund on September 3, 2024 and sell it today you would earn a total of 357.00 from holding Gmo Quality Fund or generate 11.4% 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. Gmo Quality Fund
Performance |
| Timeline |
| Legg Mason Partners |
| Gmo Quality Fund |
Legg Mason and Gmo Quality Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Legg Mason and Gmo Quality
The main advantage of trading using opposite Legg Mason and Gmo Quality positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Legg Mason position performs unexpectedly, Gmo Quality 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 Gmo Quality will offset losses from the drop in Gmo Quality's long position.| Legg Mason vs. Blackrock Government Bond | Legg Mason vs. Inverse Government Long | Legg Mason vs. Dws Government Money | Legg Mason vs. Us Government Securities |
| Gmo Quality vs. Legg Mason Partners | Gmo Quality vs. T Rowe Price | Gmo Quality vs. Qs Moderate Growth | Gmo Quality vs. T Rowe Price |
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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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