Correlation Between Xtrackers MSCI and Legg Mason

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

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

Diversification Opportunities for Xtrackers MSCI and Legg Mason

0.94

Correlation Coefficient

Xtrackers MSCI  Legg Mason

Almost no diversification

The 3 months correlation between Xtrackers and Legg is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Xtrackers MSCI All and Legg Mason International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Legg Mason International and Xtrackers MSCI 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 Xtrackers MSCI All 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 International has no effect on the direction of Xtrackers MSCI i.e., Xtrackers MSCI and Legg Mason go up and down completely randomly.

Pair Corralation between Xtrackers MSCI and Legg Mason

Given the investment horizon of 90 days Xtrackers MSCI All is expected to generate 1.44 times more return on investment than Legg Mason. However, Xtrackers MSCI is 1.44 times more volatile than Legg Mason International. It trades about 0.09 of its potential returns per unit of risk. Legg Mason International is currently generating about 0.07 per unit of risk. If you would invest  2,447  in Xtrackers MSCI All on March 22, 2024 and sell it today you would earn a total of  74.00  from holding Xtrackers MSCI All or generate 3.02% return on investment over 90 days.

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

Xtrackers MSCI All  vs.  Legg Mason International

Xtrackers MSCI All

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Xtrackers MSCI All are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Xtrackers MSCI is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Legg Mason International

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Legg Mason International are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong technical indicators, Legg Mason is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Xtrackers MSCI and Legg Mason

The main advantage of trading using opposite Xtrackers MSCI and Legg Mason positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Xtrackers MSCI 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 Xtrackers MSCI All and Legg Mason International 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 Stocks Directory module to find actively traded stocks across global markets.