Correlation Between Legg Mason and Fidelity Diversified
Can any of the company-specific risk be diversified away by investing in both Legg Mason and Fidelity 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 Fidelity Diversified into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Legg Mason Global and Fidelity Diversified International, you can compare the effects of market volatilities on Legg Mason and Fidelity 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 Fidelity Diversified. Check out your portfolio center. Please also check ongoing floating volatility patterns of Legg Mason and Fidelity Diversified.
Diversification Opportunities for Legg Mason and Fidelity Diversified
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Legg and Fidelity is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Legg Mason Global and Fidelity Diversified Internati in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity 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 Global are associated (or correlated) with Fidelity Diversified. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Diversified has no effect on the direction of Legg Mason i.e., Legg Mason and Fidelity Diversified go up and down completely randomly.
Pair Corralation between Legg Mason and Fidelity Diversified
Assuming the 90 days horizon Legg Mason is expected to generate 4.18 times less return on investment than Fidelity Diversified. But when comparing it to its historical volatility, Legg Mason Global is 3.89 times less risky than Fidelity Diversified. It trades about 0.28 of its potential returns per unit of risk. Fidelity Diversified International is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest 4,209 in Fidelity Diversified International on November 3, 2024 and sell it today you would earn a total of 213.00 from holding Fidelity Diversified International or generate 5.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Legg Mason Global vs. Fidelity Diversified Internati
Performance |
| Timeline |
| Legg Mason Global |
| Fidelity Diversified |
Legg Mason and Fidelity Diversified Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Legg Mason and Fidelity Diversified
The main advantage of trading using opposite Legg Mason and Fidelity Diversified positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Legg Mason position performs unexpectedly, Fidelity 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 Fidelity Diversified will offset losses from the drop in Fidelity Diversified's long position.| Legg Mason vs. Lord Abbett Diversified | Legg Mason vs. Lord Abbett Diversified | Legg Mason vs. Fulcrum Diversified Absolute | Legg Mason vs. Wells Fargo Diversified |
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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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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