Correlation Between Short-term Bond and Legg Mason
Can any of the company-specific risk be diversified away by investing in both Short-term Bond 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 Short-term Bond and Legg Mason into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Short Term Bond Fund and Legg Mason Partners, you can compare the effects of market volatilities on Short-term Bond 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 Short-term Bond with a short position of Legg Mason. Check out your portfolio center. Please also check ongoing floating volatility patterns of Short-term Bond and Legg Mason.
Diversification Opportunities for Short-term Bond and Legg Mason
0.12 | Correlation Coefficient |
Average diversification
The 3 months correlation between Short-term and Legg is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Short Term Bond Fund 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 Short-term Bond 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 Short Term Bond Fund 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 Short-term Bond i.e., Short-term Bond and Legg Mason go up and down completely randomly.
Pair Corralation between Short-term Bond and Legg Mason
Assuming the 90 days horizon Short-term Bond is expected to generate 32.87 times less return on investment than Legg Mason. But when comparing it to its historical volatility, Short Term Bond Fund is 14.67 times less risky than Legg Mason. It trades about 0.15 of its potential returns per unit of risk. Legg Mason Partners is currently generating about 0.33 of returns per unit of risk over similar time horizon. If you would invest 2,592 in Legg Mason Partners on September 2, 2024 and sell it today you would earn a total of 291.00 from holding Legg Mason Partners or generate 11.23% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Short Term Bond Fund vs. Legg Mason Partners
Performance |
| Timeline |
| Short Term Bond |
| Legg Mason Partners |
Short-term Bond and Legg Mason Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Short-term Bond and Legg Mason
The main advantage of trading using opposite Short-term Bond and Legg Mason positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Short-term Bond 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.| Short-term Bond vs. Legg Mason Partners | Short-term Bond vs. Small Midcap Dividend Income | Short-term Bond vs. Artisan Small Cap | Short-term Bond vs. Champlain Mid Cap |
| Legg Mason vs. Shelton Emerging Markets | Legg Mason vs. Locorr Market Trend | Legg Mason vs. Rbc Emerging Markets | Legg Mason vs. Western Asset Diversified |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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