Correlation Between Legg Mason and Invesco Gold

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

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

Diversification Opportunities for Legg Mason and Invesco Gold

0.0

Correlation Coefficient

Legg Mason  Invesco Gold

Pay attention - limited upside

The 3 months correlation between Legg and Invesco is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Legg Mason Partners and Invesco Gold Special in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Gold Special and Legg Mason 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 Legg Mason Partners are associated (or correlated) with Invesco Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Gold Special has no effect on the direction of Legg Mason i.e., Legg Mason and Invesco Gold go up and down completely randomly.

Pair Corralation between Legg Mason and Invesco Gold

If you would invest  2,561  in Invesco Gold Special on December 28, 2024 and sell it today you would earn a total of  671.00  from holding Invesco Gold Special or generate 26.2% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

Legg Mason Partners  vs.  Invesco Gold Special

Legg Mason Partners

Risk-Adjusted Performance

Very Weak

Over the last 90 days Legg Mason Partners has generated negative risk-adjusted returns adding no value to fund investors. 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.

Invesco Gold Special

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco Gold Special are ranked lower than 19 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Invesco Gold showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Legg Mason and Invesco Gold

The main advantage of trading using opposite Legg Mason and Invesco Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Legg Mason position performs unexpectedly, Invesco Gold 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 Invesco Gold will offset losses from the drop in Invesco Gold's long position.

The idea behind Legg Mason Partners and Invesco Gold Special 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.