Correlation Between Legg Mason and Inverse High
Can any of the company-specific risk be diversified away by investing in both Legg Mason and Inverse High 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 Inverse High into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Legg Mason Bw and Inverse High Yield, you can compare the effects of market volatilities on Legg Mason and Inverse High 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 Inverse High. Check out your portfolio center. Please also check ongoing floating volatility patterns of Legg Mason and Inverse High.
Diversification Opportunities for Legg Mason and Inverse High
-0.47 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Legg and Inverse is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Legg Mason Bw and Inverse High Yield in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inverse High Yield 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 Bw are associated (or correlated) with Inverse High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Inverse High Yield has no effect on the direction of Legg Mason i.e., Legg Mason and Inverse High go up and down completely randomly.
Pair Corralation between Legg Mason and Inverse High
Assuming the 90 days horizon Legg Mason Bw is expected to generate 2.14 times more return on investment than Inverse High. However, Legg Mason is 2.14 times more volatile than Inverse High Yield. It trades about 0.03 of its potential returns per unit of risk. Inverse High Yield is currently generating about 0.0 per unit of risk. If you would invest 1,819 in Legg Mason Bw on October 4, 2024 and sell it today you would earn a total of 181.00 from holding Legg Mason Bw or generate 9.95% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Legg Mason Bw vs. Inverse High Yield
Performance |
Timeline |
Legg Mason Bw |
Inverse High Yield |
Legg Mason and Inverse High Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Legg Mason and Inverse High
The main advantage of trading using opposite Legg Mason and Inverse High positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Legg Mason position performs unexpectedly, Inverse High 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 Inverse High will offset losses from the drop in Inverse High's long position.Legg Mason vs. Clearbridge Aggressive Growth | Legg Mason vs. Clearbridge Small Cap | Legg Mason vs. Qs International Equity | Legg Mason vs. Clearbridge Appreciation Fund |
Inverse High vs. Basic Materials Fund | Inverse High vs. Basic Materials Fund | Inverse High vs. Sp Midcap 400 | Inverse High vs. Basic Materials Fund |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
Other Complementary Tools
Correlation Analysis Reduce portfolio risk simply by holding instruments which are not perfectly correlated | |
Efficient Frontier Plot and analyze your portfolio and positions against risk-return landscape of the market. | |
Portfolio Comparator Compare the composition, asset allocations and performance of any two portfolios in your account | |
Price Ceiling Movement Calculate and plot Price Ceiling Movement for different equity instruments | |
Commodity Directory Find actively traded commodities issued by global exchanges |