Correlation Between Legg Mason and Calvert Aggressive
Can any of the company-specific risk be diversified away by investing in both Legg Mason and Calvert Aggressive 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 Calvert Aggressive 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 Calvert Aggressive Allocation, you can compare the effects of market volatilities on Legg Mason and Calvert Aggressive 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 Calvert Aggressive. Check out your portfolio center. Please also check ongoing floating volatility patterns of Legg Mason and Calvert Aggressive.
Diversification Opportunities for Legg Mason and Calvert Aggressive
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Legg and Calvert is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Legg Mason Partners and Calvert Aggressive Allocation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Calvert Aggressive 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 Calvert Aggressive. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Calvert Aggressive has no effect on the direction of Legg Mason i.e., Legg Mason and Calvert Aggressive go up and down completely randomly.
Pair Corralation between Legg Mason and Calvert Aggressive
Assuming the 90 days trading horizon Legg Mason is expected to generate 1.59 times less return on investment than Calvert Aggressive. But when comparing it to its historical volatility, Legg Mason Partners is 3.77 times less risky than Calvert Aggressive. It trades about 0.24 of its potential returns per unit of risk. Calvert Aggressive Allocation is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 2,087 in Calvert Aggressive Allocation on September 3, 2024 and sell it today you would earn a total of 213.00 from holding Calvert Aggressive Allocation or generate 10.21% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Legg Mason Partners vs. Calvert Aggressive Allocation
Performance |
| Timeline |
| Legg Mason Partners |
| Calvert Aggressive |
Legg Mason and Calvert Aggressive Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Legg Mason and Calvert Aggressive
The main advantage of trading using opposite Legg Mason and Calvert Aggressive positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Legg Mason position performs unexpectedly, Calvert Aggressive 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 Calvert Aggressive will offset losses from the drop in Calvert Aggressive's long position.The idea behind Legg Mason Partners and Calvert Aggressive Allocation pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Calvert Aggressive vs. American Funds Growth | Calvert Aggressive vs. American Funds Growth | Calvert Aggressive vs. Franklin Mutual Shares | Calvert Aggressive vs. Franklin Mutual Shares |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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