Correlation Between Legg Mason and Ab Global
Can any of the company-specific risk be diversified away by investing in both Legg Mason and Ab Global 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 Ab Global 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 Ab Global Risk, you can compare the effects of market volatilities on Legg Mason and Ab Global 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 Ab Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of Legg Mason and Ab Global.
Diversification Opportunities for Legg Mason and Ab Global
0.19 | Correlation Coefficient |
Average diversification
The 3 months correlation between Legg and CBSYX is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Legg Mason Partners and Ab Global Risk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ab Global Risk 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 Ab Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ab Global Risk has no effect on the direction of Legg Mason i.e., Legg Mason and Ab Global go up and down completely randomly.
Pair Corralation between Legg Mason and Ab Global
Assuming the 90 days horizon Legg Mason is expected to generate 2.61 times less return on investment than Ab Global. But when comparing it to its historical volatility, Legg Mason Partners is 3.93 times less risky than Ab Global. It trades about 0.13 of its potential returns per unit of risk. Ab Global Risk is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 1,588 in Ab Global Risk on September 3, 2024 and sell it today you would earn a total of 221.00 from holding Ab Global Risk or generate 13.92% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Legg Mason Partners vs. Ab Global Risk
Performance |
| Timeline |
| Legg Mason Partners |
| Ab Global Risk |
Legg Mason and Ab Global Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Legg Mason and Ab Global
The main advantage of trading using opposite Legg Mason and Ab Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Legg Mason position performs unexpectedly, Ab Global 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 Ab Global will offset losses from the drop in Ab Global'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 |
| Ab Global vs. Absolute Convertible Arbitrage | Ab Global vs. Putnam Convertible Incm Gwth | Ab Global vs. Virtus Convertible | Ab Global vs. Lord Abbett Convertible |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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