Correlation Between Legg Mason and Multisector Bond
Can any of the company-specific risk be diversified away by investing in both Legg Mason and Multisector Bond 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 Multisector Bond 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 Multisector Bond Sma, you can compare the effects of market volatilities on Legg Mason and Multisector Bond 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 Multisector Bond. Check out your portfolio center. Please also check ongoing floating volatility patterns of Legg Mason and Multisector Bond.
Diversification Opportunities for Legg Mason and Multisector Bond
0.0 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Legg and Multisector is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Legg Mason Partners and Multisector Bond Sma in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Multisector Bond Sma 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 Multisector Bond. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Multisector Bond Sma has no effect on the direction of Legg Mason i.e., Legg Mason and Multisector Bond go up and down completely randomly.
Pair Corralation between Legg Mason and Multisector Bond
Assuming the 90 days horizon Legg Mason is expected to generate 1.9 times less return on investment than Multisector Bond. In addition to that, Legg Mason is 2.58 times more volatile than Multisector Bond Sma. It trades about 0.02 of its total potential returns per unit of risk. Multisector Bond Sma is currently generating about 0.1 per unit of volatility. If you would invest 1,104 in Multisector Bond Sma on September 12, 2024 and sell it today you would earn a total of 272.00 from holding Multisector Bond Sma or generate 24.64% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 98.8% |
| Values | Daily Returns |
Legg Mason Partners vs. Multisector Bond Sma
Performance |
| Timeline |
| Legg Mason Partners |
| Multisector Bond Sma |
Legg Mason and Multisector Bond Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Legg Mason and Multisector Bond
The main advantage of trading using opposite Legg Mason and Multisector Bond positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Legg Mason position performs unexpectedly, Multisector Bond 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 Multisector Bond will offset losses from the drop in Multisector Bond's long position.| Legg Mason vs. Dreyfus Natural Resources | Legg Mason vs. Goehring Rozencwajg Resources | Legg Mason vs. Thrivent Natural Resources | Legg Mason vs. Tortoise Energy Independence |
| Multisector Bond vs. SCOR PK | Multisector Bond vs. Morningstar Unconstrained Allocation | Multisector Bond vs. Thrivent High Yield | Multisector Bond vs. Via Renewables |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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