Correlation Between WisdomTree International and Legg Mason
Can any of the company-specific risk be diversified away by investing in both WisdomTree International 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 WisdomTree International and Legg Mason into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between WisdomTree International Hedged and Legg Mason Low, you can compare the effects of market volatilities on WisdomTree International 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 WisdomTree International with a short position of Legg Mason. Check out your portfolio center. Please also check ongoing floating volatility patterns of WisdomTree International and Legg Mason.
Diversification Opportunities for WisdomTree International and Legg Mason
-0.08 | Correlation Coefficient |
Good diversification
The 3 months correlation between WisdomTree and Legg is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree International Hedge and Legg Mason Low in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Legg Mason Low and WisdomTree International 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 WisdomTree International Hedged 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 Low has no effect on the direction of WisdomTree International i.e., WisdomTree International and Legg Mason go up and down completely randomly.
Pair Corralation between WisdomTree International and Legg Mason
Given the investment horizon of 90 days WisdomTree International is expected to generate 15.36 times less return on investment than Legg Mason. In addition to that, WisdomTree International is 1.2 times more volatile than Legg Mason Low. It trades about 0.01 of its total potential returns per unit of risk. Legg Mason Low is currently generating about 0.15 per unit of volatility. If you would invest 3,442 in Legg Mason Low on September 1, 2024 and sell it today you would earn a total of 682.00 from holding Legg Mason Low or generate 19.81% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
WisdomTree International Hedge vs. Legg Mason Low
Performance |
| Timeline |
| WisdomTree International |
| Legg Mason Low |
WisdomTree International and Legg Mason Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with WisdomTree International and Legg Mason
The main advantage of trading using opposite WisdomTree International and Legg Mason positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WisdomTree International 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 WisdomTree International Hedged and Legg Mason Low 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.
| Legg Mason vs. iShares Core SP | Legg Mason vs. iShares Core MSCI | Legg Mason vs. iShares Broad USD | Legg Mason vs. iShares Core SP |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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