Correlation Between Legg Mason and 1919 Maryland

Can any of the company-specific risk be diversified away by investing in both Legg Mason and 1919 Maryland 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 1919 Maryland 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 1919 Maryland Tax Free, you can compare the effects of market volatilities on Legg Mason and 1919 Maryland 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 1919 Maryland. Check out your portfolio center. Please also check ongoing floating volatility patterns of Legg Mason and 1919 Maryland.

Diversification Opportunities for Legg Mason and 1919 Maryland

0.52

Correlation Coefficient

Legg Mason  1919 Maryland

Very weak diversification

The 3 months correlation between Legg and 1919 is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Legg Mason Partners and 1919 Maryland Tax Free in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 1919 Maryland Tax 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 1919 Maryland. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 1919 Maryland Tax has no effect on the direction of Legg Mason i.e., Legg Mason and 1919 Maryland go up and down completely randomly.

Pair Corralation between Legg Mason and 1919 Maryland

Assuming the 90 days horizon Legg Mason Partners is expected to generate 4.91 times more return on investment than 1919 Maryland. However, Legg Mason is 4.91 times more volatile than 1919 Maryland Tax Free. It trades about 0.02 of its potential returns per unit of risk. 1919 Maryland Tax Free is currently generating about 0.02 per unit of risk. If you would invest  92.00  in Legg Mason Partners on February 7, 2024 and sell it today you would earn a total of  8.00  from holding Legg Mason Partners or generate 8.7% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	85.77%
Values	Daily Returns

Legg Mason Partners  vs.  1919 Maryland Tax Free

Legg Mason Partners

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Legg Mason Partners are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. 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.

1919 Maryland Tax

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days 1919 Maryland Tax Free has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental indicators, 1919 Maryland 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 1919 Maryland

The main advantage of trading using opposite Legg Mason and 1919 Maryland positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Legg Mason position performs unexpectedly, 1919 Maryland 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 1919 Maryland will offset losses from the drop in 1919 Maryland's long position.

The idea behind Legg Mason Partners and 1919 Maryland Tax Free 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.