Correlation Between Legg Mason and Columbia Select
Can any of the company-specific risk be diversified away by investing in both Legg Mason and Columbia Select 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 Select into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Legg Mason Global and Columbia Select Smaller Cap, you can compare the effects of market volatilities on Legg Mason and Columbia Select 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 Select. Check out your portfolio center. Please also check ongoing floating volatility patterns of Legg Mason and Columbia Select.
Diversification Opportunities for Legg Mason and Columbia Select
-0.37 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Legg and Columbia is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Legg Mason Global and Columbia Select Smaller Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Columbia Select Smaller 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 Global are associated (or correlated) with Columbia Select. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Columbia Select Smaller has no effect on the direction of Legg Mason i.e., Legg Mason and Columbia Select go up and down completely randomly.
Pair Corralation between Legg Mason and Columbia Select
Assuming the 90 days horizon Legg Mason Global is expected to generate 0.19 times more return on investment than Columbia Select. However, Legg Mason Global is 5.31 times less risky than Columbia Select. It trades about 0.16 of its potential returns per unit of risk. Columbia Select Smaller Cap is currently generating about -0.13 per unit of risk. If you would invest 914.00 in Legg Mason Global on December 29, 2024 and sell it today you would earn a total of 18.00 from holding Legg Mason Global or generate 1.97% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Legg Mason Global vs. Columbia Select Smaller Cap
Performance |
Timeline |
Legg Mason Global |
Columbia Select Smaller |
Legg Mason and Columbia Select Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Legg Mason and Columbia Select
The main advantage of trading using opposite Legg Mason and Columbia Select positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Legg Mason position performs unexpectedly, Columbia Select 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 Select will offset losses from the drop in Columbia Select's long position.Legg Mason vs. Franklin Mutual Beacon | Legg Mason vs. Templeton Developing Markets | Legg Mason vs. Franklin Mutual Global | Legg Mason vs. Franklin Mutual Global |
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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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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