Correlation Between Ab Small and Legg Mason
Can any of the company-specific risk be diversified away by investing in both Ab Small 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 Ab Small and Legg Mason into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ab Small Cap and Legg Mason Global, you can compare the effects of market volatilities on Ab Small 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 Ab Small with a short position of Legg Mason. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ab Small and Legg Mason.
Diversification Opportunities for Ab Small and Legg Mason
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between SCYVX and Legg is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Ab Small Cap and Legg Mason Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Legg Mason Global and Ab Small 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 Ab Small 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 Global has no effect on the direction of Ab Small i.e., Ab Small and Legg Mason go up and down completely randomly.
Pair Corralation between Ab Small and Legg Mason
Assuming the 90 days horizon Ab Small Cap is expected to generate 3.47 times more return on investment than Legg Mason. However, Ab Small is 3.47 times more volatile than Legg Mason Global. It trades about 0.02 of its potential returns per unit of risk. Legg Mason Global is currently generating about 0.04 per unit of risk. If you would invest 1,412 in Ab Small Cap on October 26, 2024 and sell it today you would earn a total of 97.00 from holding Ab Small Cap or generate 6.87% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ab Small Cap vs. Legg Mason Global
Performance |
| Timeline |
| Ab Small Cap |
| Legg Mason Global |
Ab Small and Legg Mason Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ab Small and Legg Mason
The main advantage of trading using opposite Ab Small and Legg Mason positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ab Small 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.| Ab Small vs. Qs Large Cap | Ab Small vs. Tax Managed Large Cap | Ab Small vs. Alternative Asset Allocation | Ab Small vs. Rational Strategic Allocation |
| Legg Mason vs. Elfun Government Money | Legg Mason vs. John Hancock Money | Legg Mason vs. Edward Jones Money | Legg Mason vs. Dws Government Money |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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