Correlation Between Legg Mason and Columbia Porate

Can any of the company-specific risk be diversified away by investing in both Legg Mason and Columbia Porate 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 Columbia Porate 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 Columbia Porate Income, you can compare the effects of market volatilities on Legg Mason and Columbia Porate 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 Columbia Porate. Check out your portfolio center. Please also check ongoing floating volatility patterns of Legg Mason and Columbia Porate.

Diversification Opportunities for Legg Mason and Columbia Porate

0.49

Correlation Coefficient

Legg Mason  Columbia Porate

Very weak diversification

The 3 months correlation between Legg and Columbia is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Legg Mason Bw and Columbia Porate Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Columbia Porate Income 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 Columbia Porate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Columbia Porate Income has no effect on the direction of Legg Mason i.e., Legg Mason and Columbia Porate go up and down completely randomly.

Pair Corralation between Legg Mason and Columbia Porate

Assuming the 90 days horizon Legg Mason Bw is expected to under-perform the Columbia Porate. In addition to that, Legg Mason is 9.04 times more volatile than Columbia Porate Income. It trades about -0.31 of its total potential returns per unit of risk. Columbia Porate Income is currently generating about -0.51 per unit of volatility. If you would invest  926.00  in Columbia Porate Income on October 6, 2024 and sell it today you would lose (24.00) from holding Columbia Porate Income or give up 2.59% of portfolio value over 90 days.

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

Legg Mason Bw  vs.  Columbia Porate Income

Legg Mason Bw

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Legg Mason Bw has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Columbia Porate Income

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Legg Mason and Columbia Porate

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

The idea behind Legg Mason Bw and Columbia Porate Income 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.

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 Bonds Directory module to find actively traded corporate debentures issued by US companies.