Correlation Between Legg Mason and Dreyfus Equity
Can any of the company-specific risk be diversified away by investing in both Legg Mason and Dreyfus Equity 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 Dreyfus Equity 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 Dreyfus Equity Income, you can compare the effects of market volatilities on Legg Mason and Dreyfus Equity 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 Dreyfus Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Legg Mason and Dreyfus Equity.
Diversification Opportunities for Legg Mason and Dreyfus Equity
0.23 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Legg and Dreyfus is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Legg Mason Partners and Dreyfus Equity Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dreyfus Equity Income 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 Dreyfus Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dreyfus Equity Income has no effect on the direction of Legg Mason i.e., Legg Mason and Dreyfus Equity go up and down completely randomly.
Pair Corralation between Legg Mason and Dreyfus Equity
Assuming the 90 days horizon Legg Mason is expected to generate 6.5 times less return on investment than Dreyfus Equity. But when comparing it to its historical volatility, Legg Mason Partners is 5.54 times less risky than Dreyfus Equity. It trades about 0.13 of its potential returns per unit of risk. Dreyfus Equity Income is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 2,518 in Dreyfus Equity Income on September 3, 2024 and sell it today you would earn a total of 748.00 from holding Dreyfus Equity Income or generate 29.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Legg Mason Partners vs. Dreyfus Equity Income
Performance |
| Timeline |
| Legg Mason Partners |
| Dreyfus Equity Income |
Legg Mason and Dreyfus Equity Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Legg Mason and Dreyfus Equity
The main advantage of trading using opposite Legg Mason and Dreyfus Equity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Legg Mason position performs unexpectedly, Dreyfus Equity 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 Dreyfus Equity will offset losses from the drop in Dreyfus Equity'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 |
| Dreyfus Equity vs. Dodge Cox Stock | Dreyfus Equity vs. American Funds American | Dreyfus Equity vs. American Funds American | Dreyfus Equity vs. American Mutual 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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