Correlation Between IShares Core and Legg Mason

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

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

Diversification Opportunities for IShares Core and Legg Mason

0.74

Correlation Coefficient

IShares Core  Legg Mason

Poor diversification

The 3 months correlation between IShares and Legg is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding iShares Core Dividend and Legg Mason Low in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Legg Mason Low and IShares Core 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 iShares Core Dividend 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 Low has no effect on the direction of IShares Core i.e., IShares Core and Legg Mason go up and down completely randomly.

Pair Corralation between IShares Core and Legg Mason

Given the investment horizon of 90 days iShares Core Dividend is expected to generate 1.12 times more return on investment than Legg Mason. However, IShares Core is 1.12 times more volatile than Legg Mason Low. It trades about 0.12 of its potential returns per unit of risk. Legg Mason Low is currently generating about 0.12 per unit of risk. If you would invest  6,174  in iShares Core Dividend on August 30, 2024 and sell it today you would earn a total of  298.00  from holding iShares Core Dividend or generate 4.83% return on investment over 90 days.

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

iShares Core Dividend  vs.  Legg Mason Low

iShares Core Dividend

Risk-Adjusted Performance

9 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Core Dividend are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, IShares Core is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Legg Mason Low

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Legg Mason Low are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical indicators, Legg Mason is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with IShares Core and Legg Mason

The main advantage of trading using opposite IShares Core and Legg Mason positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Core 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 iShares Core Dividend and Legg Mason Low 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.