Correlation Between Legg Mason and Payden Regal
Can any of the company-specific risk be diversified away by investing in both Legg Mason and Payden Regal 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 Payden Regal 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 The Payden Regal, you can compare the effects of market volatilities on Legg Mason and Payden Regal 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 Payden Regal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Legg Mason and Payden Regal.
Diversification Opportunities for Legg Mason and Payden Regal
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Legg and Payden is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Legg Mason Partners and The Payden Regal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Payden Regal 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 Payden Regal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Payden Regal has no effect on the direction of Legg Mason i.e., Legg Mason and Payden Regal go up and down completely randomly.
Pair Corralation between Legg Mason and Payden Regal
Assuming the 90 days trading horizon Legg Mason Partners is expected to generate 1.85 times more return on investment than Payden Regal. However, Legg Mason is 1.85 times more volatile than The Payden Regal. It trades about 0.11 of its potential returns per unit of risk. The Payden Regal is currently generating about 0.16 per unit of risk. If you would invest 1,012 in Legg Mason Partners on September 12, 2024 and sell it today you would earn a total of 304.00 from holding Legg Mason Partners or generate 30.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Legg Mason Partners vs. The Payden Regal
Performance |
| Timeline |
| Legg Mason Partners |
| Payden Regal |
Legg Mason and Payden Regal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Legg Mason and Payden Regal
The main advantage of trading using opposite Legg Mason and Payden Regal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Legg Mason position performs unexpectedly, Payden Regal 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 Payden Regal will offset losses from the drop in Payden Regal's long position.| Legg Mason vs. Transamerica Intermediate Muni | Legg Mason vs. T Rowe Price | Legg Mason vs. T Rowe Price | Legg Mason vs. Bbh Intermediate Municipal |
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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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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