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 Intermediate, 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
0.97 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Legg and Western is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Legg Mason Bw and Western Asset Intermediate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Asset Interm 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 Interm 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 2.17 times more volatile than Western Asset Intermediate. It trades about -0.16 of its total potential returns per unit of risk. Western Asset Intermediate is currently generating about -0.06 per unit of volatility. If you would invest 964.00 in Western Asset Intermediate on August 28, 2024 and sell it today you would lose (3.00) from holding Western Asset Intermediate or give up 0.31% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Legg Mason Bw vs. Western Asset Intermediate
Performance |
| Timeline |
| Legg Mason Bw |
| Western Asset Interm |
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. T Rowe Price | Legg Mason vs. Federated Mdt Large | Legg Mason vs. Dodge Cox Stock | Legg Mason vs. Massmutual Select T |
| Western Asset vs. Clearbridge Aggressive Growth | Western Asset vs. Clearbridge Small Cap | Western Asset vs. Qs International Equity | Western Asset vs. Clearbridge Appreciation Fund |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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