Correlation Between Legg Mason and Aqr International
Can any of the company-specific risk be diversified away by investing in both Legg Mason and Aqr International 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 Aqr International 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 Aqr International Defensive, you can compare the effects of market volatilities on Legg Mason and Aqr International 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 Aqr International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Legg Mason and Aqr International.
Diversification Opportunities for Legg Mason and Aqr International
-0.28 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Legg and Aqr is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Legg Mason Partners and Aqr International Defensive in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aqr International 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 Aqr International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aqr International has no effect on the direction of Legg Mason i.e., Legg Mason and Aqr International go up and down completely randomly.
Pair Corralation between Legg Mason and Aqr International
Assuming the 90 days horizon Legg Mason is expected to generate 2.11 times less return on investment than Aqr International. But when comparing it to its historical volatility, Legg Mason Partners is 5.1 times less risky than Aqr International. It trades about 0.13 of its potential returns per unit of risk. Aqr International Defensive is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 1,388 in Aqr International Defensive on August 24, 2024 and sell it today you would earn a total of 118.00 from holding Aqr International Defensive or generate 8.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.6% |
| Values | Daily Returns |
Legg Mason Partners vs. Aqr International Defensive
Performance |
| Timeline |
| Legg Mason Partners |
| Aqr International |
Legg Mason and Aqr International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Legg Mason and Aqr International
The main advantage of trading using opposite Legg Mason and Aqr International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Legg Mason position performs unexpectedly, Aqr International 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 Aqr International will offset losses from the drop in Aqr International'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 |
| Aqr International vs. Legg Mason Partners | Aqr International vs. Transamerica Funds | Aqr International vs. Institutional Fiduciary Trust | Aqr International vs. Aim Investment Secs |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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