Correlation Between IShares Broad and Legg Mason
Can any of the company-specific risk be diversified away by investing in both IShares Broad 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 IShares Broad and Legg Mason into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares Broad USD and Legg Mason Low, you can compare the effects of market volatilities on IShares Broad 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 IShares Broad with a short position of Legg Mason. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Broad and Legg Mason.
Diversification Opportunities for IShares Broad and Legg Mason
0.07 | Correlation Coefficient |
Significant diversification
The 3 months correlation between IShares and Legg is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding iShares Broad USD 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 IShares Broad 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 iShares Broad USD 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 IShares Broad i.e., IShares Broad and Legg Mason go up and down completely randomly.
Pair Corralation between IShares Broad and Legg Mason
Given the investment horizon of 90 days IShares Broad is expected to generate 3.84 times less return on investment than Legg Mason. But when comparing it to its historical volatility, iShares Broad USD is 1.75 times less risky than Legg Mason. It trades about 0.1 of its potential returns per unit of risk. Legg Mason Low is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest 3,532 in Legg Mason Low on September 3, 2024 and sell it today you would earn a total of 593.00 from holding Legg Mason Low or generate 16.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares Broad USD vs. Legg Mason Low
Performance |
| Timeline |
| iShares Broad USD |
| Legg Mason Low |
IShares Broad and Legg Mason Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Broad and Legg Mason
The main advantage of trading using opposite IShares Broad and Legg Mason positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Broad 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.| IShares Broad vs. iShares 5 10 Year | IShares Broad vs. iShares Broad USD | IShares Broad vs. iShares 1 5 Year | IShares Broad vs. iShares 0 5 Year |
| 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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