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 Mid Small and Legg Mason Partners, 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
0.99 | Correlation Coefficient |
No risk reduction
The 3 months correlation between Tax-managed and Legg is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Tax Managed Mid Small and Legg Mason Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Legg Mason Partners 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 Mid Small 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 Partners 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 1.34 times less return on investment than Legg Mason. But when comparing it to its historical volatility, Tax Managed Mid Small is 1.11 times less risky than Legg Mason. It trades about 0.29 of its potential returns per unit of risk. Legg Mason Partners is currently generating about 0.34 of returns per unit of risk over similar time horizon. If you would invest 2,590 in Legg Mason Partners on September 3, 2024 and sell it today you would earn a total of 293.00 from holding Legg Mason Partners or generate 11.31% 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 Mid Small vs. Legg Mason Partners
Performance |
| Timeline |
| Tax Managed Mid |
| Legg Mason Partners |
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. Vanguard Small Cap Index | Tax-managed vs. Vanguard Small Cap Index | Tax-managed vs. Vanguard Small Cap Index | Tax-managed vs. Vanguard Small Cap Index |
| Legg Mason vs. Hennessy Nerstone Mid | Legg Mason vs. Fpa Queens Road | Legg Mason vs. American Century Etf | Legg Mason vs. Columbia Small Cap |
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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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