Correlation Between Legg Mason and Mainstay Balanced
Can any of the company-specific risk be diversified away by investing in both Legg Mason and Mainstay Balanced 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 Mainstay Balanced 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 Mainstay Balanced Fund, you can compare the effects of market volatilities on Legg Mason and Mainstay Balanced 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 Mainstay Balanced. Check out your portfolio center. Please also check ongoing floating volatility patterns of Legg Mason and Mainstay Balanced.
Diversification Opportunities for Legg Mason and Mainstay Balanced
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Legg and Mainstay is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Legg Mason Partners and Mainstay Balanced Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mainstay Balanced 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 Mainstay Balanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mainstay Balanced has no effect on the direction of Legg Mason i.e., Legg Mason and Mainstay Balanced go up and down completely randomly.
Pair Corralation between Legg Mason and Mainstay Balanced
Assuming the 90 days trading horizon Legg Mason is expected to generate 1.45 times less return on investment than Mainstay Balanced. But when comparing it to its historical volatility, Legg Mason Partners is 2.53 times less risky than Mainstay Balanced. It trades about 0.26 of its potential returns per unit of risk. Mainstay Balanced Fund is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 2,974 in Mainstay Balanced Fund on September 3, 2024 and sell it today you would earn a total of 259.00 from holding Mainstay Balanced Fund or generate 8.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Legg Mason Partners vs. Mainstay Balanced Fund
Performance |
| Timeline |
| Legg Mason Partners |
| Mainstay Balanced |
Legg Mason and Mainstay Balanced Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Legg Mason and Mainstay Balanced
The main advantage of trading using opposite Legg Mason and Mainstay Balanced positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Legg Mason position performs unexpectedly, Mainstay Balanced 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 Mainstay Balanced will offset losses from the drop in Mainstay Balanced's long position.The idea behind Legg Mason Partners and Mainstay Balanced Fund 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.| Mainstay Balanced vs. Ambrus Core Bond | Mainstay Balanced vs. Maryland Tax Free Bond | Mainstay Balanced vs. Federated Pennsylvania Municipal | Mainstay Balanced vs. California Bond 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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