Correlation Between Legg Mason and Oklahoma Municipal
Can any of the company-specific risk be diversified away by investing in both Legg Mason and Oklahoma Municipal 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 Oklahoma Municipal 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 Oklahoma Municipal Fund, you can compare the effects of market volatilities on Legg Mason and Oklahoma Municipal 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 Oklahoma Municipal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Legg Mason and Oklahoma Municipal.
Diversification Opportunities for Legg Mason and Oklahoma Municipal
0.06 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Legg and Oklahoma is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Legg Mason Partners and Oklahoma Municipal Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oklahoma Municipal 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 Oklahoma Municipal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oklahoma Municipal has no effect on the direction of Legg Mason i.e., Legg Mason and Oklahoma Municipal go up and down completely randomly.
Pair Corralation between Legg Mason and Oklahoma Municipal
Assuming the 90 days trading horizon Legg Mason is expected to generate 1.35 times less return on investment than Oklahoma Municipal. But when comparing it to its historical volatility, Legg Mason Partners is 1.86 times less risky than Oklahoma Municipal. It trades about 0.31 of its potential returns per unit of risk. Oklahoma Municipal Fund is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest 1,049 in Oklahoma Municipal Fund on September 2, 2024 and sell it today you would earn a total of 17.00 from holding Oklahoma Municipal Fund or generate 1.62% 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. Oklahoma Municipal Fund
Performance |
| Timeline |
| Legg Mason Partners |
| Oklahoma Municipal |
Legg Mason and Oklahoma Municipal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Legg Mason and Oklahoma Municipal
The main advantage of trading using opposite Legg Mason and Oklahoma Municipal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Legg Mason position performs unexpectedly, Oklahoma Municipal 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 Oklahoma Municipal will offset losses from the drop in Oklahoma Municipal'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 |
| Oklahoma Municipal vs. Royce Global Financial | Oklahoma Municipal vs. Prudential Jennison Financial | Oklahoma Municipal vs. Angel Oak Financial | Oklahoma Municipal vs. Mesirow Financial Small |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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