Correlation Between Legg Mason and Rising Rates
Can any of the company-specific risk be diversified away by investing in both Legg Mason and Rising Rates 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 Rising Rates 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 Rising Rates Opportunity, you can compare the effects of market volatilities on Legg Mason and Rising Rates 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 Rising Rates. Check out your portfolio center. Please also check ongoing floating volatility patterns of Legg Mason and Rising Rates.
Diversification Opportunities for Legg Mason and Rising Rates
0.14 | Correlation Coefficient |
Average diversification
The 3 months correlation between Legg and Rising is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Legg Mason Partners and Rising Rates Opportunity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rising Rates Opportunity 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 Rising Rates. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rising Rates Opportunity has no effect on the direction of Legg Mason i.e., Legg Mason and Rising Rates go up and down completely randomly.
Pair Corralation between Legg Mason and Rising Rates
Assuming the 90 days horizon Legg Mason is expected to generate 2.16 times less return on investment than Rising Rates. But when comparing it to its historical volatility, Legg Mason Partners is 1.26 times less risky than Rising Rates. It trades about 0.02 of its potential returns per unit of risk. Rising Rates Opportunity is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 3,040 in Rising Rates Opportunity on September 3, 2024 and sell it today you would earn a total of 643.00 from holding Rising Rates Opportunity or generate 21.15% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 99.16% |
| Values | Daily Returns |
Legg Mason Partners vs. Rising Rates Opportunity
Performance |
| Timeline |
| Legg Mason Partners |
| Rising Rates Opportunity |
Legg Mason and Rising Rates Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Legg Mason and Rising Rates
The main advantage of trading using opposite Legg Mason and Rising Rates positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Legg Mason position performs unexpectedly, Rising Rates 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 Rising Rates will offset losses from the drop in Rising Rates' 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 |
| Rising Rates vs. Touchstone Premium Yield | Rising Rates vs. Blrc Sgy Mnp | Rising Rates vs. Ambrus Core Bond | Rising Rates vs. Ultra Short Fixed Income |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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