Correlation Between SPDR Portfolio and Legg Mason
Can any of the company-specific risk be diversified away by investing in both SPDR Portfolio 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 SPDR Portfolio and Legg Mason into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SPDR Portfolio SP and Legg Mason Low, you can compare the effects of market volatilities on SPDR Portfolio 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 SPDR Portfolio with a short position of Legg Mason. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR Portfolio and Legg Mason.
Diversification Opportunities for SPDR Portfolio and Legg Mason
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between SPDR and Legg is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding SPDR Portfolio SP and Legg Mason Low in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Legg Mason Low and SPDR Portfolio 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 SPDR Portfolio SP 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 Low has no effect on the direction of SPDR Portfolio i.e., SPDR Portfolio and Legg Mason go up and down completely randomly.
Pair Corralation between SPDR Portfolio and Legg Mason
Given the investment horizon of 90 days SPDR Portfolio SP is expected to generate 1.22 times more return on investment than Legg Mason. However, SPDR Portfolio is 1.22 times more volatile than Legg Mason Low. It trades about 0.24 of its potential returns per unit of risk. Legg Mason Low is currently generating about 0.24 per unit of risk. If you would invest 5,293 in SPDR Portfolio SP on August 29, 2024 and sell it today you would earn a total of 213.00 from holding SPDR Portfolio SP or generate 4.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
SPDR Portfolio SP vs. Legg Mason Low
Performance |
| Timeline |
| SPDR Portfolio SP |
| Legg Mason Low |
SPDR Portfolio and Legg Mason Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SPDR Portfolio and Legg Mason
The main advantage of trading using opposite SPDR Portfolio and Legg Mason positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR Portfolio 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.| SPDR Portfolio vs. SPDR Portfolio SP | SPDR Portfolio vs. SPDR Portfolio SP | SPDR Portfolio vs. SPDR Portfolio SP | SPDR Portfolio vs. SPDR SP 600 |
| Legg Mason vs. Franklin International Low | Legg Mason vs. Invesco SP SmallCap | Legg Mason vs. FlexShares Quality Dividend | Legg Mason vs. Invesco SP MidCap |
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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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