Correlation Between Legg Mason and Pharmaceuticals Ultrasector
Can any of the company-specific risk be diversified away by investing in both Legg Mason and Pharmaceuticals Ultrasector 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 Pharmaceuticals Ultrasector into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Legg Mason Western and Pharmaceuticals Ultrasector Profund, you can compare the effects of market volatilities on Legg Mason and Pharmaceuticals Ultrasector 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 Pharmaceuticals Ultrasector. Check out your portfolio center. Please also check ongoing floating volatility patterns of Legg Mason and Pharmaceuticals Ultrasector.
Diversification Opportunities for Legg Mason and Pharmaceuticals Ultrasector
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Legg and Pharmaceuticals is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Legg Mason Western and Pharmaceuticals Ultrasector Pr in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pharmaceuticals Ultrasector 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 Western are associated (or correlated) with Pharmaceuticals Ultrasector. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pharmaceuticals Ultrasector has no effect on the direction of Legg Mason i.e., Legg Mason and Pharmaceuticals Ultrasector go up and down completely randomly.
Pair Corralation between Legg Mason and Pharmaceuticals Ultrasector
Assuming the 90 days horizon Legg Mason is expected to generate 5.14 times less return on investment than Pharmaceuticals Ultrasector. But when comparing it to its historical volatility, Legg Mason Western is 24.91 times less risky than Pharmaceuticals Ultrasector. It trades about 0.33 of its potential returns per unit of risk. Pharmaceuticals Ultrasector Profund is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 2,282 in Pharmaceuticals Ultrasector Profund on April 16, 2025 and sell it today you would earn a total of 42.00 from holding Pharmaceuticals Ultrasector Profund or generate 1.84% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Legg Mason Western vs. Pharmaceuticals Ultrasector Pr
Performance |
Timeline |
Legg Mason Western |
Pharmaceuticals Ultrasector |
Legg Mason and Pharmaceuticals Ultrasector Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Legg Mason and Pharmaceuticals Ultrasector
The main advantage of trading using opposite Legg Mason and Pharmaceuticals Ultrasector positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Legg Mason position performs unexpectedly, Pharmaceuticals Ultrasector 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 Pharmaceuticals Ultrasector will offset losses from the drop in Pharmaceuticals Ultrasector's long position.Legg Mason vs. Putnam Money Market | Legg Mason vs. Transamerica Intermediate Muni | Legg Mason vs. Ab Impact Municipal | Legg Mason vs. Blackrock Exchange Portfolio |
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 Anywhere module to track or share privately all of your investments from the convenience of any device.
Other Complementary Tools
Bollinger Bands Use Bollinger Bands indicator to analyze target price for a given investing horizon | |
My Watchlist Analysis Analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like | |
Portfolio Comparator Compare the composition, asset allocations and performance of any two portfolios in your account | |
Aroon Oscillator Analyze current equity momentum using Aroon Oscillator and other momentum ratios | |
Crypto Correlations Use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins |