Correlation Between Legg Mason and Wilmington Diversified
Can any of the company-specific risk be diversified away by investing in both Legg Mason and Wilmington Diversified 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 Wilmington Diversified 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 Wilmington Diversified Income, you can compare the effects of market volatilities on Legg Mason and Wilmington Diversified 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 Wilmington Diversified. Check out your portfolio center. Please also check ongoing floating volatility patterns of Legg Mason and Wilmington Diversified.
Diversification Opportunities for Legg Mason and Wilmington Diversified
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Legg and Wilmington is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Legg Mason Bw and Wilmington Diversified Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wilmington Diversified 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 Wilmington Diversified. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wilmington Diversified has no effect on the direction of Legg Mason i.e., Legg Mason and Wilmington Diversified go up and down completely randomly.
Pair Corralation between Legg Mason and Wilmington Diversified
Assuming the 90 days horizon Legg Mason is expected to generate 26.93 times less return on investment than Wilmington Diversified. In addition to that, Legg Mason is 1.09 times more volatile than Wilmington Diversified Income. It trades about 0.0 of its total potential returns per unit of risk. Wilmington Diversified Income is currently generating about 0.08 per unit of volatility. If you would invest 1,387 in Wilmington Diversified Income on December 1, 2024 and sell it today you would earn a total of 12.00 from holding Wilmington Diversified Income or generate 0.87% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Legg Mason Bw vs. Wilmington Diversified Income
Performance |
| Timeline |
| Legg Mason Bw |
| Wilmington Diversified |
Legg Mason and Wilmington Diversified Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Legg Mason and Wilmington Diversified
The main advantage of trading using opposite Legg Mason and Wilmington Diversified positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Legg Mason position performs unexpectedly, Wilmington Diversified 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 Wilmington Diversified will offset losses from the drop in Wilmington Diversified's long position.| Legg Mason vs. Angel Oak Ultrashort | Legg Mason vs. Blackrock Global Longshort | Legg Mason vs. Ashmore Emerging Markets | Legg Mason vs. Alpine Ultra Short |
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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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