Correlation Between Legg Mason and Dfa Five-year
Can any of the company-specific risk be diversified away by investing in both Legg Mason and Dfa Five-year 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 Dfa Five-year into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Legg Mason Bw and Dfa Five Year Global, you can compare the effects of market volatilities on Legg Mason and Dfa Five-year 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 Dfa Five-year. Check out your portfolio center. Please also check ongoing floating volatility patterns of Legg Mason and Dfa Five-year.
Diversification Opportunities for Legg Mason and Dfa Five-year
-0.72 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Legg and Dfa is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Legg Mason Bw and Dfa Five Year Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dfa Five Year 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 Bw are associated (or correlated) with Dfa Five-year. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dfa Five Year has no effect on the direction of Legg Mason i.e., Legg Mason and Dfa Five-year go up and down completely randomly.
Pair Corralation between Legg Mason and Dfa Five-year
Assuming the 90 days horizon Legg Mason Bw is expected to under-perform the Dfa Five-year. In addition to that, Legg Mason is 17.78 times more volatile than Dfa Five Year Global. It trades about -0.27 of its total potential returns per unit of risk. Dfa Five Year Global is currently generating about 0.47 per unit of volatility. If you would invest 1,009 in Dfa Five Year Global on January 26, 2024 and sell it today you would earn a total of 4.00 from holding Dfa Five Year Global or generate 0.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Legg Mason Bw vs. Dfa Five Year Global
Performance |
| Timeline |
| Legg Mason Bw |
| Dfa Five Year |
Legg Mason and Dfa Five-year Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Legg Mason and Dfa Five-year
The main advantage of trading using opposite Legg Mason and Dfa Five-year positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Legg Mason position performs unexpectedly, Dfa Five-year 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 Dfa Five-year will offset losses from the drop in Dfa Five-year's long position.| Legg Mason vs. Elfun Government Money | Legg Mason vs. Matson Money Equity | Legg Mason vs. Goldman Sachs Trust | Legg Mason vs. Franklin Government Money |
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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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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