Correlation Between Extended Market and Legg Mason
Can any of the company-specific risk be diversified away by investing in both Extended Market 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 Extended Market and Legg Mason into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Extended Market Index and Legg Mason Partners, you can compare the effects of market volatilities on Extended Market 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 Extended Market with a short position of Legg Mason. Check out your portfolio center. Please also check ongoing floating volatility patterns of Extended Market and Legg Mason.
Diversification Opportunities for Extended Market and Legg Mason
0.26 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Extended and Legg is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Extended Market Index 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 Extended Market 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 Extended Market Index 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 Extended Market i.e., Extended Market and Legg Mason go up and down completely randomly.
Pair Corralation between Extended Market and Legg Mason
If you would invest 2,305 in Extended Market Index on August 24, 2024 and sell it today you would earn a total of 146.00 from holding Extended Market Index or generate 6.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
Extended Market Index vs. Legg Mason Partners
Performance |
| Timeline |
| Extended Market Index |
| Legg Mason Partners |
Extended Market and Legg Mason Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Extended Market and Legg Mason
The main advantage of trading using opposite Extended Market and Legg Mason positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Extended Market 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.| Extended Market vs. Inverse Government Long | Extended Market vs. Ab Government Exchange | Extended Market vs. Government Securities Fund | Extended Market vs. Prudential Government Income |
| Legg Mason vs. Vanguard Total Stock | Legg Mason vs. Vanguard 500 Index | Legg Mason vs. Vanguard Total Stock | Legg Mason vs. Vanguard Total Stock |
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 Anywhere module to track or share privately all of your investments from the convenience of any device.
Other Complementary Tools
| Money Managers Screen money managers from public funds and ETFs managed around the world | |
| Equity Analysis Research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities | |
| Portfolio Dashboard Portfolio dashboard that provides centralized access to all your investments | |
| Bonds Directory Find actively traded corporate debentures issued by US companies | |
| Portfolio File Import Quickly import all of your third-party portfolios from your local drive in csv format |