Correlation Between Legg Mason and Western Asset
Can any of the company-specific risk be diversified away by investing in both Legg Mason and Western Asset 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 Western Asset 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 Western Asset Managed, you can compare the effects of market volatilities on Legg Mason and Western Asset 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 Western Asset. Check out your portfolio center. Please also check ongoing floating volatility patterns of Legg Mason and Western Asset.
Diversification Opportunities for Legg Mason and Western Asset
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Legg and Western is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Legg Mason Bw and Western Asset Managed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Asset Managed 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 Western Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Asset Managed has no effect on the direction of Legg Mason i.e., Legg Mason and Western Asset go up and down completely randomly.
Pair Corralation between Legg Mason and Western Asset
Assuming the 90 days horizon Legg Mason Bw is expected to under-perform the Western Asset. In addition to that, Legg Mason is 1.48 times more volatile than Western Asset Managed. It trades about -0.17 of its total potential returns per unit of risk. Western Asset Managed is currently generating about 0.13 per unit of volatility. If you would invest 1,494 in Western Asset Managed on August 24, 2024 and sell it today you would earn a total of 15.00 from holding Western Asset Managed or generate 1.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Legg Mason Bw vs. Western Asset Managed
Performance |
| Timeline |
| Legg Mason Bw |
| Western Asset Managed |
Legg Mason and Western Asset Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Legg Mason and Western Asset
The main advantage of trading using opposite Legg Mason and Western Asset positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Legg Mason position performs unexpectedly, Western Asset 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 Western Asset will offset losses from the drop in Western Asset's long position.| Legg Mason vs. Qs Large Cap | Legg Mason vs. Goldman Sachs Large | Legg Mason vs. Massmutual Select T | Legg Mason vs. Aqr Large Cap |
| Western Asset vs. Financials Ultrasector Profund | Western Asset vs. Prudential Jennison Financial | Western Asset vs. Blackrock Financial Institutions | Western Asset vs. Transamerica Financial Life |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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