Correlation Between BetaShares Legg and BetaShares Diversified

Can any of the company-specific risk be diversified away by investing in both BetaShares Legg and BetaShares Diversified 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 BetaShares Legg and BetaShares Diversified into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between BetaShares Legg Mason and BetaShares Diversified High, you can compare the effects of market volatilities on BetaShares Legg and BetaShares Diversified 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 BetaShares Legg with a short position of BetaShares Diversified. Check out your portfolio center. Please also check ongoing floating volatility patterns of BetaShares Legg and BetaShares Diversified.

Diversification Opportunities for BetaShares Legg and BetaShares Diversified

-0.02

Correlation Coefficient

BetaShares Legg  BetaShares Diversified

Good diversification

The 3 months correlation between BetaShares and BetaShares is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding BetaShares Legg Mason and BetaShares Diversified High in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BetaShares Diversified and BetaShares Legg 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 BetaShares Legg Mason are associated (or correlated) with BetaShares Diversified. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BetaShares Diversified has no effect on the direction of BetaShares Legg i.e., BetaShares Legg and BetaShares Diversified go up and down completely randomly.

Pair Corralation between BetaShares Legg and BetaShares Diversified

Assuming the 90 days trading horizon BetaShares Legg Mason is expected to under-perform the BetaShares Diversified. But the etf apears to be less risky and, when comparing its historical volatility, BetaShares Legg Mason is 1.07 times less risky than BetaShares Diversified. The etf trades about -0.1 of its potential returns per unit of risk. The BetaShares Diversified High is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  3,618  in BetaShares Diversified High on December 2, 2024 and sell it today you would earn a total of  41.00  from holding BetaShares Diversified High or generate 1.13% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	70.97%
Values	Daily Returns

BetaShares Legg Mason  vs.  BetaShares Diversified High

BetaShares Legg Mason

Risk-Adjusted Performance

Very Weak

Over the last 90 days BetaShares Legg Mason has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, BetaShares Legg is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

BetaShares Diversified

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in BetaShares Diversified High are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, BetaShares Diversified is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with BetaShares Legg and BetaShares Diversified

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

The idea behind BetaShares Legg Mason and BetaShares Diversified High 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.

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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.