Correlation Between Legg Mason and Fidelity Advisor
Can any of the company-specific risk be diversified away by investing in both Legg Mason and Fidelity Advisor 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 Fidelity Advisor 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 Fidelity Advisor Sumer, you can compare the effects of market volatilities on Legg Mason and Fidelity Advisor 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 Fidelity Advisor. Check out your portfolio center. Please also check ongoing floating volatility patterns of Legg Mason and Fidelity Advisor.
Diversification Opportunities for Legg Mason and Fidelity Advisor
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Legg and Fidelity is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Legg Mason Bw and Fidelity Advisor Sumer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Advisor Sumer 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 Fidelity Advisor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Advisor Sumer has no effect on the direction of Legg Mason i.e., Legg Mason and Fidelity Advisor go up and down completely randomly.
Pair Corralation between Legg Mason and Fidelity Advisor
Assuming the 90 days horizon Legg Mason is expected to generate 1.16 times less return on investment than Fidelity Advisor. But when comparing it to its historical volatility, Legg Mason Bw is 1.57 times less risky than Fidelity Advisor. It trades about 0.12 of its potential returns per unit of risk. Fidelity Advisor Sumer is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 3,147 in Fidelity Advisor Sumer on August 31, 2024 and sell it today you would earn a total of 1,324 from holding Fidelity Advisor Sumer or generate 42.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 99.73% |
| Values | Daily Returns |
Legg Mason Bw vs. Fidelity Advisor Sumer
Performance |
| Timeline |
| Legg Mason Bw |
| Fidelity Advisor Sumer |
Legg Mason and Fidelity Advisor Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Legg Mason and Fidelity Advisor
The main advantage of trading using opposite Legg Mason and Fidelity Advisor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Legg Mason position performs unexpectedly, Fidelity Advisor 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 Fidelity Advisor will offset losses from the drop in Fidelity Advisor's long position.The idea behind Legg Mason Bw and Fidelity Advisor Sumer 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.| Fidelity Advisor vs. Adams Diversified Equity | Fidelity Advisor vs. Oppenheimer International Diversified | Fidelity Advisor vs. American Funds Conservative | Fidelity Advisor vs. Lord Abbett Diversified |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
Other Complementary Tools
| Fundamental Analysis View fundamental data based on most recent published financial statements | |
| Portfolio Rebalancing Analyze risk-adjusted returns against different time horizons to find asset-allocation targets | |
| Correlation Analysis Reduce portfolio risk simply by holding instruments which are not perfectly correlated | |
| Transaction History View history of all your transactions and understand their impact on performance | |
| Equity Valuation Check real value of public entities based on technical and fundamental data |