Correlation Between Sp Midcap and Legg Mason

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Can any of the company-specific risk be diversified away by investing in both Sp Midcap and Legg Mason 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 Sp Midcap and Legg Mason into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sp Midcap Index and Legg Mason Partners, you can compare the effects of market volatilities on Sp Midcap and Legg Mason 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 Sp Midcap with a short position of Legg Mason. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sp Midcap and Legg Mason.

Diversification Opportunities for Sp Midcap and Legg Mason

0.21
  Correlation Coefficient

Modest diversification

The 3 months correlation between SPMIX and Legg is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Sp Midcap Index and Legg Mason Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Legg Mason Partners and Sp Midcap 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 Sp Midcap Index are associated (or correlated) with Legg Mason. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Legg Mason Partners has no effect on the direction of Sp Midcap i.e., Sp Midcap and Legg Mason go up and down completely randomly.

Pair Corralation between Sp Midcap and Legg Mason

If you would invest  2,796  in Sp Midcap Index on August 28, 2024 and sell it today you would earn a total of  225.00  from holding Sp Midcap Index or generate 8.05% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Sp Midcap Index  vs.  Legg Mason Partners

 Performance 
       Timeline  
Sp Midcap Index 

Risk-Adjusted Performance

13 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Sp Midcap Index are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Sp Midcap may actually be approaching a critical reversion point that can send shares even higher in December 2024.
Legg Mason Partners 

Risk-Adjusted Performance

9 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Legg Mason Partners are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Legg Mason is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Sp Midcap and Legg Mason Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Sp Midcap and Legg Mason

The main advantage of trading using opposite Sp Midcap and Legg Mason positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sp Midcap position performs unexpectedly, Legg Mason 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 Legg Mason will offset losses from the drop in Legg Mason's long position.
The idea behind Sp Midcap Index and Legg Mason Partners pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..

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