Correlation Between Legg Mason and Nasdaq 100
Can any of the company-specific risk be diversified away by investing in both Legg Mason and Nasdaq 100 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 Nasdaq 100 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 Nasdaq 100 Fund Investor, you can compare the effects of market volatilities on Legg Mason and Nasdaq 100 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 Nasdaq 100. Check out your portfolio center. Please also check ongoing floating volatility patterns of Legg Mason and Nasdaq 100.
Diversification Opportunities for Legg Mason and Nasdaq 100
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Legg and Nasdaq is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Legg Mason Partners and Nasdaq 100 Fund Investor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nasdaq 100 Fund 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 Nasdaq 100. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nasdaq 100 Fund has no effect on the direction of Legg Mason i.e., Legg Mason and Nasdaq 100 go up and down completely randomly.
Pair Corralation between Legg Mason and Nasdaq 100
Assuming the 90 days trading horizon Legg Mason Partners is expected to generate 0.4 times more return on investment than Nasdaq 100. However, Legg Mason Partners is 2.48 times less risky than Nasdaq 100. It trades about -0.02 of its potential returns per unit of risk. Nasdaq 100 Fund Investor is currently generating about -0.1 per unit of risk. If you would invest 1,254 in Legg Mason Partners on December 30, 2024 and sell it today you would lose (10.00) from holding Legg Mason Partners or give up 0.8% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Legg Mason Partners vs. Nasdaq 100 Fund Investor
Performance |
Timeline |
Legg Mason Partners |
Nasdaq 100 Fund |
Legg Mason and Nasdaq 100 Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Legg Mason and Nasdaq 100
The main advantage of trading using opposite Legg Mason and Nasdaq 100 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Legg Mason position performs unexpectedly, Nasdaq 100 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 Nasdaq 100 will offset losses from the drop in Nasdaq 100's long position.Legg Mason vs. Calvert Moderate Allocation | Legg Mason vs. Target Retirement 2040 | Legg Mason vs. Moderately Aggressive Balanced | Legg Mason vs. Fidelity Managed Retirement |
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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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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