Correlation Between Legg Mason and Ab Bond
Can any of the company-specific risk be diversified away by investing in both Legg Mason and Ab Bond 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 Ab Bond 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 Ab Bond Inflation, you can compare the effects of market volatilities on Legg Mason and Ab Bond 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 Ab Bond. Check out your portfolio center. Please also check ongoing floating volatility patterns of Legg Mason and Ab Bond.
Diversification Opportunities for Legg Mason and Ab Bond
-0.33 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Legg and ABNTX is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Legg Mason Partners and Ab Bond Inflation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ab Bond Inflation 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 Ab Bond. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ab Bond Inflation has no effect on the direction of Legg Mason i.e., Legg Mason and Ab Bond go up and down completely randomly.
Pair Corralation between Legg Mason and Ab Bond
Assuming the 90 days trading horizon Legg Mason Partners is expected to generate 4.52 times more return on investment than Ab Bond. However, Legg Mason is 4.52 times more volatile than Ab Bond Inflation. It trades about 0.18 of its potential returns per unit of risk. Ab Bond Inflation is currently generating about 0.08 per unit of risk. If you would invest 2,386 in Legg Mason Partners on August 29, 2024 and sell it today you would earn a total of 74.00 from holding Legg Mason Partners or generate 3.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Legg Mason Partners vs. Ab Bond Inflation
Performance |
| Timeline |
| Legg Mason Partners |
| Ab Bond Inflation |
Legg Mason and Ab Bond Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Legg Mason and Ab Bond
The main advantage of trading using opposite Legg Mason and Ab Bond positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Legg Mason position performs unexpectedly, Ab Bond 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 Ab Bond will offset losses from the drop in Ab Bond'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 |
| Ab Bond vs. HUMANA INC | Ab Bond vs. Aquagold International | Ab Bond vs. Barloworld Ltd ADR | Ab Bond vs. Morningstar Unconstrained Allocation |
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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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