Correlation Between Legg Mason and Aristotle Value
Can any of the company-specific risk be diversified away by investing in both Legg Mason and Aristotle Value 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 Aristotle Value 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 Aristotle Value Eq, you can compare the effects of market volatilities on Legg Mason and Aristotle Value 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 Aristotle Value. Check out your portfolio center. Please also check ongoing floating volatility patterns of Legg Mason and Aristotle Value.
Diversification Opportunities for Legg Mason and Aristotle Value
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Legg and Aristotle is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Legg Mason Bw and Aristotle Value Eq in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aristotle Value Eq 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 Aristotle Value. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aristotle Value Eq has no effect on the direction of Legg Mason i.e., Legg Mason and Aristotle Value go up and down completely randomly.
Pair Corralation between Legg Mason and Aristotle Value
Assuming the 90 days horizon Legg Mason is expected to generate 1.78 times less return on investment than Aristotle Value. In addition to that, Legg Mason is 1.22 times more volatile than Aristotle Value Eq. It trades about 0.04 of its total potential returns per unit of risk. Aristotle Value Eq is currently generating about 0.08 per unit of volatility. If you would invest 976.00 in Aristotle Value Eq on August 26, 2024 and sell it today you would earn a total of 145.00 from holding Aristotle Value Eq or generate 14.86% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 46.48% |
| Values | Daily Returns |
Legg Mason Bw vs. Aristotle Value Eq
Performance |
| Timeline |
| Legg Mason Bw |
| Aristotle Value Eq |
Legg Mason and Aristotle Value Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Legg Mason and Aristotle Value
The main advantage of trading using opposite Legg Mason and Aristotle Value positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Legg Mason position performs unexpectedly, Aristotle Value 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 Aristotle Value will offset losses from the drop in Aristotle Value's long position.| Legg Mason vs. Clearbridge Aggressive Growth | Legg Mason vs. Clearbridge Small Cap | Legg Mason vs. Qs International Equity | Legg Mason vs. Clearbridge Appreciation Fund |
| Aristotle Value vs. Morningstar Unconstrained Allocation | Aristotle Value vs. Goldman Sachs Large | Aristotle Value vs. Legg Mason Bw | Aristotle Value vs. Rational Strategic Allocation |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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