Correlation Between Legg Mason and Wells Fargo
Can any of the company-specific risk be diversified away by investing in both Legg Mason and Wells Fargo 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 Wells Fargo 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 Wells Fargo Short Term, you can compare the effects of market volatilities on Legg Mason and Wells Fargo 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 Wells Fargo. Check out your portfolio center. Please also check ongoing floating volatility patterns of Legg Mason and Wells Fargo.
Diversification Opportunities for Legg Mason and Wells Fargo
-0.3 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Legg and Wells is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Legg Mason Global and Wells Fargo Short Term in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wells Fargo Short 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 Wells Fargo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wells Fargo Short has no effect on the direction of Legg Mason i.e., Legg Mason and Wells Fargo go up and down completely randomly.
Pair Corralation between Legg Mason and Wells Fargo
Assuming the 90 days horizon Legg Mason is expected to generate 1.53 times less return on investment than Wells Fargo. In addition to that, Legg Mason is 1.94 times more volatile than Wells Fargo Short Term. It trades about 0.05 of its total potential returns per unit of risk. Wells Fargo Short Term is currently generating about 0.15 per unit of volatility. If you would invest 686.00 in Wells Fargo Short Term on September 4, 2024 and sell it today you would earn a total of 104.00 from holding Wells Fargo Short Term or generate 15.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Legg Mason Global vs. Wells Fargo Short Term
Performance |
| Timeline |
| Legg Mason Global |
| Wells Fargo Short |
Legg Mason and Wells Fargo Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Legg Mason and Wells Fargo
The main advantage of trading using opposite Legg Mason and Wells Fargo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Legg Mason position performs unexpectedly, Wells Fargo 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 Wells Fargo will offset losses from the drop in Wells Fargo's long position.| Legg Mason vs. Invesco Global Health | Legg Mason vs. Baron Health Care | Legg Mason vs. Deutsche Health And | Legg Mason vs. Fidelity Advisor Health |
| Wells Fargo vs. Wells Fargo Advantage | Wells Fargo vs. Wells Fargo Advantage | Wells Fargo vs. Wells Fargo Advantage | Wells Fargo vs. Wells Fargo Ultra |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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