Correlation Between Disney and Legg Mason
Can any of the company-specific risk be diversified away by investing in both Disney 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 Disney and Legg Mason into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Walt Disney and Legg Mason Partners, you can compare the effects of market volatilities on Disney 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 Disney with a short position of Legg Mason. Check out your portfolio center. Please also check ongoing floating volatility patterns of Disney and Legg Mason.
Diversification Opportunities for Disney and Legg Mason
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Disney and Legg is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Walt Disney and Legg Mason Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Legg Mason Partners and Disney 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 Walt Disney 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 Partners has no effect on the direction of Disney i.e., Disney and Legg Mason go up and down completely randomly.
Pair Corralation between Disney and Legg Mason
Considering the 90-day investment horizon Disney is expected to generate 1.39 times less return on investment than Legg Mason. In addition to that, Disney is 1.42 times more volatile than Legg Mason Partners. It trades about 0.03 of its total potential returns per unit of risk. Legg Mason Partners is currently generating about 0.06 per unit of volatility. If you would invest 1,833 in Legg Mason Partners on September 3, 2024 and sell it today you would earn a total of 634.00 from holding Legg Mason Partners or generate 34.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Walt Disney vs. Legg Mason Partners
Performance |
| Timeline |
| Walt Disney |
| Legg Mason Partners |
Disney and Legg Mason Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Disney and Legg Mason
The main advantage of trading using opposite Disney and Legg Mason positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Disney 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.| Disney vs. Roku Inc | Disney vs. AMC Entertainment Holdings | Disney vs. Paramount Global Class | Disney vs. Warner Bros Discovery |
| Legg Mason vs. Vanguard Total Stock | Legg Mason vs. Vanguard 500 Index | Legg Mason vs. Vanguard Total Stock | Legg Mason vs. Vanguard Total Stock |
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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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