Correlation Between Legg Mason and Investment Grade

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

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

Diversification Opportunities for Legg Mason and Investment Grade

-0.01

Correlation Coefficient

Legg Mason  Investment Grade

Good diversification

The 3 months correlation between Legg and Investment is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Legg Mason Partners and Investment Grade Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Investment Grade Bond and Legg Mason 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 Legg Mason Partners are associated (or correlated) with Investment Grade. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Investment Grade Bond has no effect on the direction of Legg Mason i.e., Legg Mason and Investment Grade go up and down completely randomly.

Pair Corralation between Legg Mason and Investment Grade

If you would invest  100.00  in Legg Mason Partners on September 5, 2024 and sell it today you would earn a total of  0.00  from holding Legg Mason Partners or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Legg Mason Partners  vs.  Investment Grade Bond

Legg Mason Partners

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Legg Mason Partners 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.

Investment Grade Bond

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Legg Mason and Investment Grade

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

The idea behind Legg Mason Partners and Investment Grade Bond 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.

Check out your portfolio center.

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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.