Correlation Between Strategic Allocation: and Legg Mason

Can any of the company-specific risk be diversified away by investing in both Strategic Allocation: 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 Strategic Allocation: and Legg Mason into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Strategic Allocation Aggressive and Legg Mason Bw, you can compare the effects of market volatilities on Strategic Allocation: 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 Strategic Allocation: with a short position of Legg Mason. Check out your portfolio center. Please also check ongoing floating volatility patterns of Strategic Allocation: and Legg Mason.

Diversification Opportunities for Strategic Allocation: and Legg Mason

0.89

Correlation Coefficient

Strategic Allocation:  Legg Mason

Very poor diversification

The 3 months correlation between Strategic and Legg is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Strategic Allocation Aggressiv and Legg Mason Bw in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Legg Mason Bw and Strategic Allocation: 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 Strategic Allocation Aggressive 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 Bw has no effect on the direction of Strategic Allocation: i.e., Strategic Allocation: and Legg Mason go up and down completely randomly.

Pair Corralation between Strategic Allocation: and Legg Mason

Assuming the 90 days horizon Strategic Allocation Aggressive is expected to under-perform the Legg Mason. But the mutual fund apears to be less risky and, when comparing its historical volatility, Strategic Allocation Aggressive is 1.11 times less risky than Legg Mason. The mutual fund trades about -0.02 of its potential returns per unit of risk. The Legg Mason Bw is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  1,997  in Legg Mason Bw on December 30, 2024 and sell it today you would earn a total of  52.00  from holding Legg Mason Bw or generate 2.6% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Strategic Allocation Aggressiv  vs.  Legg Mason Bw

Strategic Allocation:

Risk-Adjusted Performance

Very Weak

Over the last 90 days Strategic Allocation Aggressive has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Strategic Allocation: is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Legg Mason Bw

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Legg Mason Bw are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Legg Mason is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Strategic Allocation: and Legg Mason

The main advantage of trading using opposite Strategic Allocation: and Legg Mason positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Strategic Allocation: 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.

The idea behind Strategic Allocation Aggressive and Legg Mason Bw 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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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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.