Correlation Between Legg Mason and Pro-blend(r) Maximum
Can any of the company-specific risk be diversified away by investing in both Legg Mason and Pro-blend(r) Maximum 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 Pro-blend(r) Maximum 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 Pro Blend Maximum Term, you can compare the effects of market volatilities on Legg Mason and Pro-blend(r) Maximum 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 Pro-blend(r) Maximum. Check out your portfolio center. Please also check ongoing floating volatility patterns of Legg Mason and Pro-blend(r) Maximum.
Diversification Opportunities for Legg Mason and Pro-blend(r) Maximum
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Legg and Pro-blend(r) is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Legg Mason Partners and Pro Blend Maximum Term in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pro-blend(r) Maximum 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 Pro-blend(r) Maximum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pro-blend(r) Maximum has no effect on the direction of Legg Mason i.e., Legg Mason and Pro-blend(r) Maximum go up and down completely randomly.
Pair Corralation between Legg Mason and Pro-blend(r) Maximum
Assuming the 90 days trading horizon Legg Mason is expected to generate 1.22 times less return on investment than Pro-blend(r) Maximum. But when comparing it to its historical volatility, Legg Mason Partners is 1.61 times less risky than Pro-blend(r) Maximum. It trades about 0.28 of its potential returns per unit of risk. Pro Blend Maximum Term is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest 2,686 in Pro Blend Maximum Term on September 7, 2024 and sell it today you would earn a total of 71.00 from holding Pro Blend Maximum Term or generate 2.64% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Legg Mason Partners vs. Pro Blend Maximum Term
Performance |
Timeline |
Legg Mason Partners |
Pro-blend(r) Maximum |
Legg Mason and Pro-blend(r) Maximum Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Legg Mason and Pro-blend(r) Maximum
The main advantage of trading using opposite Legg Mason and Pro-blend(r) Maximum positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Legg Mason position performs unexpectedly, Pro-blend(r) Maximum 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 Pro-blend(r) Maximum will offset losses from the drop in Pro-blend(r) Maximum's long position.Legg Mason vs. Vanguard Total Stock | Legg Mason vs. Vanguard 500 Index | Legg Mason vs. Vanguard Total Stock | Legg Mason vs. Vanguard Total Stock |
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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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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