Correlation Between Legg Mason and Low-duration Bond
Can any of the company-specific risk be diversified away by investing in both Legg Mason and Low-duration 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 Low-duration 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 Low Duration Bond Investor, you can compare the effects of market volatilities on Legg Mason and Low-duration 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 Low-duration Bond. Check out your portfolio center. Please also check ongoing floating volatility patterns of Legg Mason and Low-duration Bond.
Diversification Opportunities for Legg Mason and Low-duration Bond
0.07 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Legg and Low-duration is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Legg Mason Partners and Low Duration Bond Investor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Low Duration Bond 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 Low-duration Bond. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Low Duration Bond has no effect on the direction of Legg Mason i.e., Legg Mason and Low-duration Bond go up and down completely randomly.
Pair Corralation between Legg Mason and Low-duration Bond
Assuming the 90 days trading horizon Legg Mason Partners is expected to generate 1.79 times more return on investment than Low-duration Bond. However, Legg Mason is 1.79 times more volatile than Low Duration Bond Investor. It trades about 0.32 of its potential returns per unit of risk. Low Duration Bond Investor is currently generating about -0.07 per unit of risk. If you would invest 665.00 in Legg Mason Partners on September 3, 2024 and sell it today you would earn a total of 8.00 from holding Legg Mason Partners or generate 1.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Legg Mason Partners vs. Low Duration Bond Investor
Performance |
| Timeline |
| Legg Mason Partners |
| Low Duration Bond |
Legg Mason and Low-duration Bond Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Legg Mason and Low-duration Bond
The main advantage of trading using opposite Legg Mason and Low-duration Bond positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Legg Mason position performs unexpectedly, Low-duration 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 Low-duration Bond will offset losses from the drop in Low-duration Bond's long position.The idea behind Legg Mason Partners and Low Duration Bond Investor 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.| Low-duration Bond vs. Smallcap Growth Fund | Low-duration Bond vs. Pace Smallmedium Growth | Low-duration Bond vs. Pace Large Growth | Low-duration Bond vs. Franklin Growth Opportunities |
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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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