Correlation Between Western Asset and Legg Mason
Can any of the company-specific risk be diversified away by investing in both Western Asset and Legg Mason 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 Western Asset and Legg Mason into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Western Asset Pennsylvania and Legg Mason Partners, you can compare the effects of market volatilities on Western Asset and Legg Mason 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 Western Asset with a short position of Legg Mason. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Asset and Legg Mason.
Diversification Opportunities for Western Asset and Legg Mason
-0.04 | Correlation Coefficient |
Good diversification
The 3 months correlation between Western and Legg is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset Pennsylvania and Legg Mason Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Legg Mason Partners and Western Asset 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 Western Asset Pennsylvania are associated (or correlated) with Legg Mason. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Legg Mason Partners has no effect on the direction of Western Asset i.e., Western Asset and Legg Mason go up and down completely randomly.
Pair Corralation between Western Asset and Legg Mason
Assuming the 90 days horizon Western Asset is expected to generate 1.07 times less return on investment than Legg Mason. But when comparing it to its historical volatility, Western Asset Pennsylvania is 1.8 times less risky than Legg Mason. It trades about 0.15 of its potential returns per unit of risk. Legg Mason Partners is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 1,408 in Legg Mason Partners on August 24, 2024 and sell it today you would earn a total of 14.00 from holding Legg Mason Partners or generate 0.99% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Western Asset Pennsylvania vs. Legg Mason Partners
Performance |
| Timeline |
| Western Asset Pennsy |
| Legg Mason Partners |
Western Asset and Legg Mason Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Asset and Legg Mason
The main advantage of trading using opposite Western Asset and Legg Mason positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Asset position performs unexpectedly, Legg Mason 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 Legg Mason will offset losses from the drop in Legg Mason's long position.| Western Asset vs. Vanguard Pennsylvania Long Term | Western Asset vs. Vanguard Pennsylvania Long Term | Western Asset vs. Franklin Pennsylvania Tax Free | Western Asset vs. Franklin Pennsylvania Tax Free |
| Legg Mason vs. Delaware Limited Term Diversified | Legg Mason vs. Lord Abbett Diversified | Legg Mason vs. Eic Value Fund | Legg Mason vs. Western Asset Pennsylvania |
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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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