Correlation Between Legg Mason and Mid Cap
Can any of the company-specific risk be diversified away by investing in both Legg Mason and Mid Cap 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 Mid Cap 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 Mid Cap Strategic, you can compare the effects of market volatilities on Legg Mason and Mid Cap 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 Mid Cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Legg Mason and Mid Cap.
Diversification Opportunities for Legg Mason and Mid Cap
0.98 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Legg and Mid is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Legg Mason Partners and Mid Cap Strategic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mid Cap Strategic 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 Mid Cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mid Cap Strategic has no effect on the direction of Legg Mason i.e., Legg Mason and Mid Cap go up and down completely randomly.
Pair Corralation between Legg Mason and Mid Cap
Assuming the 90 days trading horizon Legg Mason is expected to generate 1.78 times less return on investment than Mid Cap. In addition to that, Legg Mason is 1.31 times more volatile than Mid Cap Strategic. It trades about 0.05 of its total potential returns per unit of risk. Mid Cap Strategic is currently generating about 0.11 per unit of volatility. If you would invest 1,495 in Mid Cap Strategic on August 31, 2024 and sell it today you would earn a total of 696.00 from holding Mid Cap Strategic or generate 46.56% 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. Mid Cap Strategic
Performance |
| Timeline |
| Legg Mason Partners |
| Mid Cap Strategic |
Legg Mason and Mid Cap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Legg Mason and Mid Cap
The main advantage of trading using opposite Legg Mason and Mid Cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Legg Mason position performs unexpectedly, Mid Cap 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 Mid Cap will offset losses from the drop in Mid Cap'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 |
| Mid Cap vs. Victory Rs Small | Mid Cap vs. Qs Small Capitalization | Mid Cap vs. Legg Mason Partners | Mid Cap vs. Ab Small Cap |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
Other Complementary Tools
| Odds Of Bankruptcy Get analysis of equity chance of financial distress in the next 2 years | |
| Earnings Calls Check upcoming earnings announcements updated hourly across public exchanges | |
| AI Portfolio Architect Use AI to generate optimal portfolios and find profitable investment opportunities | |
| Portfolio Diagnostics Use generated alerts and portfolio events aggregator to diagnose current holdings | |
| Watchlist Optimization Optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm |