Correlation Between Legg Mason and Us Small
Can any of the company-specific risk be diversified away by investing in both Legg Mason and Us 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 Us 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 Us Small Cap, you can compare the effects of market volatilities on Legg Mason and Us 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 Us Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Legg Mason and Us Small.
Diversification Opportunities for Legg Mason and Us Small
0.99 | Correlation Coefficient |
No risk reduction
The 3 months correlation between Legg and RLESX is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Legg Mason Partners and Us Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Us 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 Us Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Us Small Cap has no effect on the direction of Legg Mason i.e., Legg Mason and Us Small go up and down completely randomly.
Pair Corralation between Legg Mason and Us Small
Assuming the 90 days trading horizon Legg Mason Partners is expected to generate 0.98 times more return on investment than Us Small. However, Legg Mason Partners is 1.02 times less risky than Us Small. It trades about 0.29 of its potential returns per unit of risk. Us Small Cap is currently generating about 0.24 per unit of risk. If you would invest 2,604 in Legg Mason Partners on August 31, 2024 and sell it today you would earn a total of 266.00 from holding Legg Mason Partners or generate 10.22% 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. Us Small Cap
Performance |
| Timeline |
| Legg Mason Partners |
| Us Small Cap |
Legg Mason and Us Small Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Legg Mason and Us Small
The main advantage of trading using opposite Legg Mason and Us Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Legg Mason position performs unexpectedly, Us 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 Us Small will offset losses from the drop in Us 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 |
| Us Small vs. Qs Large Cap | Us Small vs. Dodge Cox Stock | Us Small vs. Fundamental Large Cap | Us Small vs. American Mutual Fund |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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