Correlation Between Steel Dynamics and Legg Mason
Can any of the company-specific risk be diversified away by investing in both Steel Dynamics 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 Steel Dynamics and Legg Mason into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Steel Dynamics and Legg Mason Partners, you can compare the effects of market volatilities on Steel Dynamics 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 Steel Dynamics with a short position of Legg Mason. Check out your portfolio center. Please also check ongoing floating volatility patterns of Steel Dynamics and Legg Mason.
Diversification Opportunities for Steel Dynamics and Legg Mason
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Steel and Legg is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Steel Dynamics 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 Steel Dynamics 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 Steel Dynamics 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 Steel Dynamics i.e., Steel Dynamics and Legg Mason go up and down completely randomly.
Pair Corralation between Steel Dynamics and Legg Mason
Given the investment horizon of 90 days Steel Dynamics is expected to under-perform the Legg Mason. In addition to that, Steel Dynamics is 4.02 times more volatile than Legg Mason Partners. It trades about -0.29 of its total potential returns per unit of risk. Legg Mason Partners is currently generating about 0.14 per unit of volatility. If you would invest 1,303 in Legg Mason Partners on September 12, 2024 and sell it today you would earn a total of 13.00 from holding Legg Mason Partners or generate 1.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Steel Dynamics vs. Legg Mason Partners
Performance |
| Timeline |
| Steel Dynamics |
| Legg Mason Partners |
Steel Dynamics and Legg Mason Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Steel Dynamics and Legg Mason
The main advantage of trading using opposite Steel Dynamics and Legg Mason positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Steel Dynamics 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.| Steel Dynamics vs. Cleveland Cliffs | Steel Dynamics vs. United States Steel | Steel Dynamics vs. ArcelorMittal SA ADR | Steel Dynamics vs. Reliance Steel Aluminum |
| Legg Mason vs. Transamerica Intermediate Muni | Legg Mason vs. T Rowe Price | Legg Mason vs. T Rowe Price | Legg Mason vs. Bbh Intermediate Municipal |
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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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