Correlation Between Deutsche Real and Legg Mason

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

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

Diversification Opportunities for Deutsche Real and Legg Mason

0.83

Correlation Coefficient

Deutsche Real  Legg Mason

Very poor diversification

The 3 months correlation between Deutsche and Legg is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Deutsche Real Estate and Legg Mason Bw in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Legg Mason Bw and Deutsche Real 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 Deutsche Real Estate are associated (or correlated) with Legg Mason. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Legg Mason Bw has no effect on the direction of Deutsche Real i.e., Deutsche Real and Legg Mason go up and down completely randomly.

Pair Corralation between Deutsche Real and Legg Mason

Assuming the 90 days horizon Deutsche Real Estate is expected to under-perform the Legg Mason. In addition to that, Deutsche Real is 1.81 times more volatile than Legg Mason Bw. It trades about -0.23 of its total potential returns per unit of risk. Legg Mason Bw is currently generating about -0.23 per unit of volatility. If you would invest  2,092  in Legg Mason Bw on October 10, 2024 and sell it today you would lose (78.00) from holding Legg Mason Bw or give up 3.73% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Deutsche Real Estate  vs.  Legg Mason Bw

Deutsche Real Estate

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Deutsche Real Estate has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Deutsche Real is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Legg Mason Bw

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Legg Mason Bw has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Legg Mason is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Deutsche Real and Legg Mason

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

The idea behind Deutsche Real Estate and Legg Mason Bw 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.