Correlation Between BetaShares Managed and BetaShares Legg
Can any of the company-specific risk be diversified away by investing in both BetaShares Managed and BetaShares Legg 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 BetaShares Managed and BetaShares Legg into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BetaShares Managed Risk and BetaShares Legg Mason, you can compare the effects of market volatilities on BetaShares Managed and BetaShares Legg 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 BetaShares Managed with a short position of BetaShares Legg. Check out your portfolio center. Please also check ongoing floating volatility patterns of BetaShares Managed and BetaShares Legg.
Diversification Opportunities for BetaShares Managed and BetaShares Legg
0.21 | Correlation Coefficient |
Modest diversification
The 3 months correlation between BetaShares and BetaShares is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding BetaShares Managed Risk and BetaShares Legg Mason in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BetaShares Legg Mason and BetaShares Managed 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 BetaShares Managed Risk are associated (or correlated) with BetaShares Legg. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BetaShares Legg Mason has no effect on the direction of BetaShares Managed i.e., BetaShares Managed and BetaShares Legg go up and down completely randomly.
Pair Corralation between BetaShares Managed and BetaShares Legg
Assuming the 90 days trading horizon BetaShares Managed is expected to generate 128.93 times less return on investment than BetaShares Legg. But when comparing it to its historical volatility, BetaShares Managed Risk is 142.74 times less risky than BetaShares Legg. It trades about 0.1 of its potential returns per unit of risk. BetaShares Legg Mason is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 799.00 in BetaShares Legg Mason on August 26, 2024 and sell it today you would earn a total of 7,930 from holding BetaShares Legg Mason or generate 992.49% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.01% |
| Values | Daily Returns |
BetaShares Managed Risk vs. BetaShares Legg Mason
Performance |
| Timeline |
| BetaShares Managed Risk |
| BetaShares Legg Mason |
BetaShares Managed and BetaShares Legg Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BetaShares Managed and BetaShares Legg
The main advantage of trading using opposite BetaShares Managed and BetaShares Legg positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BetaShares Managed position performs unexpectedly, BetaShares Legg 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 BetaShares Legg will offset losses from the drop in BetaShares Legg's long position.The idea behind BetaShares Managed Risk and BetaShares Legg Mason pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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