Correlation Between Cboe Vest and Legg Mason

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

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

Diversification Opportunities for Cboe Vest and Legg Mason

-0.42

Correlation Coefficient

Cboe Vest  Legg Mason

Very good diversification

The 3 months correlation between Cboe and Legg is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Cboe Vest Large and Legg Mason Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Legg Mason Global and Cboe Vest 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 Cboe Vest Large 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 Global has no effect on the direction of Cboe Vest i.e., Cboe Vest and Legg Mason go up and down completely randomly.

Pair Corralation between Cboe Vest and Legg Mason

Assuming the 90 days horizon Cboe Vest Large is expected to generate 1.5 times more return on investment than Legg Mason. However, Cboe Vest is 1.5 times more volatile than Legg Mason Global. It trades about 0.22 of its potential returns per unit of risk. Legg Mason Global is currently generating about -0.09 per unit of risk. If you would invest  1,961  in Cboe Vest Large on September 18, 2024 and sell it today you would earn a total of  95.00  from holding Cboe Vest Large or generate 4.84% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Cboe Vest Large  vs.  Legg Mason Global

Cboe Vest Large

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Cboe Vest Large are ranked lower than 17 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Cboe Vest is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Legg Mason Global

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Legg Mason Global has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental 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 Cboe Vest and Legg Mason

The main advantage of trading using opposite Cboe Vest and Legg Mason positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cboe Vest 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 Cboe Vest Large and Legg Mason Global 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.