Correlation Between Legg Mason and Short Oil
Can any of the company-specific risk be diversified away by investing in both Legg Mason and Short Oil 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 Short Oil 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 Short Oil Gas, you can compare the effects of market volatilities on Legg Mason and Short Oil 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 Short Oil. Check out your portfolio center. Please also check ongoing floating volatility patterns of Legg Mason and Short Oil.
Diversification Opportunities for Legg Mason and Short Oil
0.01 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Legg and Short is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Legg Mason Partners and Short Oil Gas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Short Oil Gas 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 Short Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Short Oil Gas has no effect on the direction of Legg Mason i.e., Legg Mason and Short Oil go up and down completely randomly.
Pair Corralation between Legg Mason and Short Oil
Assuming the 90 days horizon Legg Mason Partners is expected to generate 0.13 times more return on investment than Short Oil. However, Legg Mason Partners is 7.96 times less risky than Short Oil. It trades about 0.14 of its potential returns per unit of risk. Short Oil Gas is currently generating about -0.03 per unit of risk. If you would invest 95.00 in Legg Mason Partners on August 25, 2024 and sell it today you would earn a total of 5.00 from holding Legg Mason Partners or generate 5.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 99.63% |
| Values | Daily Returns |
Legg Mason Partners vs. Short Oil Gas
Performance |
| Timeline |
| Legg Mason Partners |
| Short Oil Gas |
Legg Mason and Short Oil Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Legg Mason and Short Oil
The main advantage of trading using opposite Legg Mason and Short Oil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Legg Mason position performs unexpectedly, Short Oil 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 Short Oil will offset losses from the drop in Short Oil'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 |
| Short Oil vs. Legg Mason Partners | Short Oil vs. Usaa Mutual Funds | Short Oil vs. Dreyfus Institutional Reserves | Short Oil vs. Chestnut Street Exchange |
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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