Correlation Between Tax-managed and Legg Mason
Can any of the company-specific risk be diversified away by investing in both Tax-managed and Legg Mason 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 Tax-managed and Legg Mason into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Tax Managed Large Cap and Legg Mason Bw, you can compare the effects of market volatilities on Tax-managed and Legg Mason 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 Tax-managed with a short position of Legg Mason. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tax-managed and Legg Mason.
Diversification Opportunities for Tax-managed and Legg Mason
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Tax-managed and Legg is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Tax Managed Large Cap and Legg Mason Bw in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Legg Mason Bw and Tax-managed 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 Tax Managed Large Cap are associated (or correlated) with Legg Mason. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Legg Mason Bw has no effect on the direction of Tax-managed i.e., Tax-managed and Legg Mason go up and down completely randomly.
Pair Corralation between Tax-managed and Legg Mason
Assuming the 90 days horizon Tax-managed is expected to generate 1.78 times less return on investment than Legg Mason. But when comparing it to its historical volatility, Tax Managed Large Cap is 1.21 times less risky than Legg Mason. It trades about 0.15 of its potential returns per unit of risk. Legg Mason Bw is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest 2,216 in Legg Mason Bw on August 28, 2024 and sell it today you would earn a total of 105.00 from holding Legg Mason Bw or generate 4.74% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Tax Managed Large Cap vs. Legg Mason Bw
Performance |
| Timeline |
| Tax Managed Large |
| Legg Mason Bw |
Tax-managed and Legg Mason Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tax-managed and Legg Mason
The main advantage of trading using opposite Tax-managed and Legg Mason positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tax-managed position performs unexpectedly, Legg Mason 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 Legg Mason will offset losses from the drop in Legg Mason's long position.| Tax-managed vs. Origin Emerging Markets | Tax-managed vs. Doubleline Emerging Markets | Tax-managed vs. Artisan Emerging Markets | Tax-managed vs. Rbc Bluebay Emerging |
| Legg Mason vs. Clearbridge Aggressive Growth | Legg Mason vs. Clearbridge Small Cap | Legg Mason vs. Qs International Equity | Legg Mason vs. Clearbridge Appreciation 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
Other Complementary Tools
| Idea Optimizer Use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio | |
| Piotroski F Score Get Piotroski F Score based on the binary analysis strategy of nine different fundamentals | |
| Balance Of Power Check stock momentum by analyzing Balance Of Power indicator and other technical ratios | |
| Portfolio Center All portfolio management and optimization tools to improve performance of your portfolios | |
| Portfolio Suggestion Get suggestions outside of your existing asset allocation including your own model portfolios |