Correlation Between Us Government and Legg Mason
Can any of the company-specific risk be diversified away by investing in both Us Government 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 Us Government and Legg Mason into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Us Government Securities and Legg Mason Partners, you can compare the effects of market volatilities on Us Government 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 Us Government with a short position of Legg Mason. Check out your portfolio center. Please also check ongoing floating volatility patterns of Us Government and Legg Mason.
Diversification Opportunities for Us Government and Legg Mason
-0.43 | Correlation Coefficient |
Very good diversification
The 3 months correlation between USGFX and Legg is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Us Government Securities 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 Us Government 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 Us Government Securities 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 Us Government i.e., Us Government and Legg Mason go up and down completely randomly.
Pair Corralation between Us Government and Legg Mason
Assuming the 90 days horizon Us Government Securities is expected to under-perform the Legg Mason. But the mutual fund apears to be less risky and, when comparing its historical volatility, Us Government Securities is 1.34 times less risky than Legg Mason. The mutual fund trades about -0.08 of its potential returns per unit of risk. The Legg Mason Partners is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 1,256 in Legg Mason Partners on September 3, 2024 and sell it today you would earn a total of 55.00 from holding Legg Mason Partners or generate 4.38% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Us Government Securities vs. Legg Mason Partners
Performance |
| Timeline |
| Us Government Securities |
| Legg Mason Partners |
Us Government and Legg Mason Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Us Government and Legg Mason
The main advantage of trading using opposite Us Government and Legg Mason positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Us Government 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.| Us Government vs. Aig Government Money | Us Government vs. John Hancock Government | Us Government vs. Fidelity Series Government | Us Government vs. Us Government Securities |
| Legg Mason vs. Blackrock Government Bond | Legg Mason vs. Inverse Government Long | Legg Mason vs. Dws Government Money | Legg Mason vs. Us Government Securities |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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