Correlation Between Calvert Short and Legg Mason

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

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

Diversification Opportunities for Calvert Short and Legg Mason

0.78

Correlation Coefficient

Calvert Short  Legg Mason

Poor diversification

The 3 months correlation between Calvert and Legg is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Calvert Short Duration 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 Calvert Short 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 Calvert Short Duration 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 Calvert Short i.e., Calvert Short and Legg Mason go up and down completely randomly.

Pair Corralation between Calvert Short and Legg Mason

Assuming the 90 days horizon Calvert Short is expected to generate 1.09 times less return on investment than Legg Mason. But when comparing it to its historical volatility, Calvert Short Duration is 4.97 times less risky than Legg Mason. It trades about 0.06 of its potential returns per unit of risk. Legg Mason Bw is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  865.00  in Legg Mason Bw on September 3, 2024 and sell it today you would earn a total of  1.00  from holding Legg Mason Bw or generate 0.12% return on investment over 90 days.

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

Calvert Short Duration  vs.  Legg Mason Bw

Calvert Short Duration

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Calvert Short Duration are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Calvert Short 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 Calvert Short and Legg Mason

The main advantage of trading using opposite Calvert Short and Legg Mason positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Calvert Short 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 Calvert Short Duration 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.