Correlation Between Legg Mason and Wasatch Long/short
Can any of the company-specific risk be diversified away by investing in both Legg Mason and Wasatch Long/short 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 Wasatch Long/short into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Legg Mason Partners and Wasatch Longshort Alpha, you can compare the effects of market volatilities on Legg Mason and Wasatch Long/short 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 Wasatch Long/short. Check out your portfolio center. Please also check ongoing floating volatility patterns of Legg Mason and Wasatch Long/short.
Diversification Opportunities for Legg Mason and Wasatch Long/short
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Legg and Wasatch is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Legg Mason Partners and Wasatch Longshort Alpha in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wasatch Longshort Alpha 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 Partners are associated (or correlated) with Wasatch Long/short. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wasatch Longshort Alpha has no effect on the direction of Legg Mason i.e., Legg Mason and Wasatch Long/short go up and down completely randomly.
Pair Corralation between Legg Mason and Wasatch Long/short
Assuming the 90 days trading horizon Legg Mason Partners is expected to generate 0.72 times more return on investment than Wasatch Long/short. However, Legg Mason Partners is 1.39 times less risky than Wasatch Long/short. It trades about 0.19 of its potential returns per unit of risk. Wasatch Longshort Alpha is currently generating about 0.05 per unit of risk. If you would invest 1,507 in Legg Mason Partners on September 3, 2024 and sell it today you would earn a total of 115.00 from holding Legg Mason Partners or generate 7.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Legg Mason Partners vs. Wasatch Longshort Alpha
Performance |
| Timeline |
| Legg Mason Partners |
| Wasatch Longshort Alpha |
Legg Mason and Wasatch Long/short Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Legg Mason and Wasatch Long/short
The main advantage of trading using opposite Legg Mason and Wasatch Long/short positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Legg Mason position performs unexpectedly, Wasatch Long/short 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 Wasatch Long/short will offset losses from the drop in Wasatch Long/short's long position.| Legg Mason vs. Avantis Large Cap | Legg Mason vs. Qs Large Cap | Legg Mason vs. Americafirst Large Cap | Legg Mason vs. Dana Large Cap |
| Wasatch Long/short vs. Fundamental Large Cap | Wasatch Long/short vs. Pace Large Value | Wasatch Long/short vs. Avantis Large Cap | Wasatch Long/short vs. Touchstone Large Cap |
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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