Correlation Between Eaton Vance and Legg Mason

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

By analyzing existing cross correlation between Eaton Vance Tax Managed and Legg Mason Global, you can compare the effects of market volatilities on Eaton Vance 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 Eaton Vance with a short position of Legg Mason. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eaton Vance and Legg Mason.

Diversification Opportunities for Eaton Vance and Legg Mason

0.42

Correlation Coefficient

Eaton Vance  Legg Mason

Very weak diversification

The 3 months correlation between Eaton and Legg is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Eaton Vance Tax Managed and Legg Mason Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Legg Mason Global and Eaton Vance 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 Eaton Vance Tax Managed 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 Global has no effect on the direction of Eaton Vance i.e., Eaton Vance and Legg Mason go up and down completely randomly.

Pair Corralation between Eaton Vance and Legg Mason

Assuming the 90 days horizon Eaton Vance Tax Managed is expected to under-perform the Legg Mason. In addition to that, Eaton Vance is 3.91 times more volatile than Legg Mason Global. It trades about -0.2 of its total potential returns per unit of risk. Legg Mason Global is currently generating about -0.34 per unit of volatility. If you would invest  928.00  in Legg Mason Global on October 11, 2024 and sell it today you would lose (15.00) from holding Legg Mason Global or give up 1.62% of portfolio value over 90 days.

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

Eaton Vance Tax Managed  vs.  Legg Mason Global

Eaton Vance Tax

Risk-Adjusted Performance

0 of 100

Very Weak

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

Legg Mason Global

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Legg Mason Global has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental 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 Eaton Vance and Legg Mason

The main advantage of trading using opposite Eaton Vance and Legg Mason positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eaton Vance 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 Eaton Vance Tax Managed and Legg Mason Global 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..