Correlation Between Legg Mason and Kinetics Small
Can any of the company-specific risk be diversified away by investing in both Legg Mason and Kinetics 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 Kinetics 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 Kinetics Small Cap, you can compare the effects of market volatilities on Legg Mason and Kinetics 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 Kinetics Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Legg Mason and Kinetics Small.
Diversification Opportunities for Legg Mason and Kinetics Small
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Legg and Kinetics is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Legg Mason Partners and Kinetics Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kinetics 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 Kinetics Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kinetics Small Cap has no effect on the direction of Legg Mason i.e., Legg Mason and Kinetics Small go up and down completely randomly.
Pair Corralation between Legg Mason and Kinetics Small
Assuming the 90 days trading horizon Legg Mason is expected to generate 2.37 times less return on investment than Kinetics Small. But when comparing it to its historical volatility, Legg Mason Partners is 1.73 times less risky than Kinetics Small. It trades about 0.29 of its potential returns per unit of risk. Kinetics Small Cap is currently generating about 0.4 of returns per unit of risk over similar time horizon. If you would invest 18,428 in Kinetics Small Cap on August 31, 2024 and sell it today you would earn a total of 4,723 from holding Kinetics Small Cap or generate 25.63% 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. Kinetics Small Cap
Performance |
| Timeline |
| Legg Mason Partners |
| Kinetics Small Cap |
Legg Mason and Kinetics Small Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Legg Mason and Kinetics Small
The main advantage of trading using opposite Legg Mason and Kinetics Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Legg Mason position performs unexpectedly, Kinetics 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 Kinetics Small will offset losses from the drop in Kinetics Small'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 |
| Kinetics Small vs. Abr 7525 Volatility | Kinetics Small vs. T Rowe Price | Kinetics Small vs. Rbb Fund | Kinetics Small vs. Iaadx |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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