Correlation Between Legg Mason and Strategic Asset
Can any of the company-specific risk be diversified away by investing in both Legg Mason and Strategic Asset 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 Strategic Asset 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 Strategic Asset Management, you can compare the effects of market volatilities on Legg Mason and Strategic Asset 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 Strategic Asset. Check out your portfolio center. Please also check ongoing floating volatility patterns of Legg Mason and Strategic Asset.
Diversification Opportunities for Legg Mason and Strategic Asset
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Legg and Strategic is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Legg Mason Partners and Strategic Asset Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Strategic Asset Mana 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 Strategic Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Strategic Asset Mana has no effect on the direction of Legg Mason i.e., Legg Mason and Strategic Asset go up and down completely randomly.
Pair Corralation between Legg Mason and Strategic Asset
Assuming the 90 days trading horizon Legg Mason is expected to generate 2.72 times less return on investment than Strategic Asset. But when comparing it to its historical volatility, Legg Mason Partners is 2.57 times less risky than Strategic Asset. It trades about 0.22 of its potential returns per unit of risk. Strategic Asset Management is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest 1,712 in Strategic Asset Management on August 31, 2024 and sell it today you would earn a total of 42.00 from holding Strategic Asset Management or generate 2.45% 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. Strategic Asset Management
Performance |
| Timeline |
| Legg Mason Partners |
| Strategic Asset Mana |
Legg Mason and Strategic Asset Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Legg Mason and Strategic Asset
The main advantage of trading using opposite Legg Mason and Strategic Asset positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Legg Mason position performs unexpectedly, Strategic Asset 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 Strategic Asset will offset losses from the drop in Strategic Asset'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 |
| Strategic Asset vs. Federated Ohio Municipal | Strategic Asset vs. Oklahoma Municipal Fund | Strategic Asset vs. Transamerica Intermediate Muni | Strategic Asset vs. Legg Mason Partners |
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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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