Correlation Between Legg Mason and Tax Free
Can any of the company-specific risk be diversified away by investing in both Legg Mason and Tax Free 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 Tax Free 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 Tax Free Conservative Income, you can compare the effects of market volatilities on Legg Mason and Tax Free 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 Tax Free. Check out your portfolio center. Please also check ongoing floating volatility patterns of Legg Mason and Tax Free.
Diversification Opportunities for Legg Mason and Tax Free
-0.49 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Legg and Tax is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Legg Mason Partners and Tax Free Conservative Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tax Free Conservative 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 Tax Free. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tax Free Conservative has no effect on the direction of Legg Mason i.e., Legg Mason and Tax Free go up and down completely randomly.
Pair Corralation between Legg Mason and Tax Free
Assuming the 90 days trading horizon Legg Mason Partners is expected to under-perform the Tax Free. In addition to that, Legg Mason is 32.37 times more volatile than Tax Free Conservative Income. It trades about -0.12 of its total potential returns per unit of risk. Tax Free Conservative Income is currently generating about 0.15 per unit of volatility. If you would invest 997.00 in Tax Free Conservative Income on December 1, 2024 and sell it today you would earn a total of 4.00 from holding Tax Free Conservative Income or generate 0.4% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Very Weak |
Accuracy | 98.36% |
Values | Daily Returns |
Legg Mason Partners vs. Tax Free Conservative Income
Performance |
Timeline |
Legg Mason Partners |
Tax Free Conservative |
Legg Mason and Tax Free Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Legg Mason and Tax Free
The main advantage of trading using opposite Legg Mason and Tax Free positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Legg Mason position performs unexpectedly, Tax Free 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 Tax Free will offset losses from the drop in Tax Free'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 |
Tax Free vs. Ultra Short Fixed Income | Tax Free vs. T Rowe Price | Tax Free vs. Federated Government Income | Tax Free vs. Ms Global Fixed |
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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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