Correlation Between Tax Exempt and Legg Mason
Can any of the company-specific risk be diversified away by investing in both Tax Exempt 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 Tax Exempt and Legg Mason into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Tax Exempt Bond and Legg Mason Partners, you can compare the effects of market volatilities on Tax Exempt 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 Tax Exempt with a short position of Legg Mason. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tax Exempt and Legg Mason.
Diversification Opportunities for Tax Exempt and Legg Mason
0.36 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Tax and Legg is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Tax Exempt Bond 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 Tax Exempt 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 Tax Exempt Bond 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 Tax Exempt i.e., Tax Exempt and Legg Mason go up and down completely randomly.
Pair Corralation between Tax Exempt and Legg Mason
Assuming the 90 days horizon Tax Exempt is expected to generate 2.65 times less return on investment than Legg Mason. But when comparing it to its historical volatility, Tax Exempt Bond is 2.16 times less risky than Legg Mason. It trades about 0.09 of its potential returns per unit of risk. Legg Mason Partners is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 1,098 in Legg Mason Partners on September 12, 2024 and sell it today you would earn a total of 218.00 from holding Legg Mason Partners or generate 19.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Tax Exempt Bond vs. Legg Mason Partners
Performance |
| Timeline |
| Tax Exempt Bond |
| Legg Mason Partners |
Tax Exempt and Legg Mason Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tax Exempt and Legg Mason
The main advantage of trading using opposite Tax Exempt and Legg Mason positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tax Exempt 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.| Tax Exempt vs. Transamerica Intermediate Muni | Tax Exempt vs. The National Tax Free | Tax Exempt vs. California High Yield Municipal | Tax Exempt vs. Gamco Global Telecommunications |
| 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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