Correlation Between Legg Mason and Wealthbuilder Moderate
Can any of the company-specific risk be diversified away by investing in both Legg Mason and Wealthbuilder Moderate 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 Wealthbuilder Moderate 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 Wealthbuilder Moderate Balanced, you can compare the effects of market volatilities on Legg Mason and Wealthbuilder Moderate 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 Wealthbuilder Moderate. Check out your portfolio center. Please also check ongoing floating volatility patterns of Legg Mason and Wealthbuilder Moderate.
Diversification Opportunities for Legg Mason and Wealthbuilder Moderate
0.03 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Legg and Wealthbuilder is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Legg Mason Partners and Wealthbuilder Moderate Balance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wealthbuilder Moderate 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 Wealthbuilder Moderate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wealthbuilder Moderate has no effect on the direction of Legg Mason i.e., Legg Mason and Wealthbuilder Moderate go up and down completely randomly.
Pair Corralation between Legg Mason and Wealthbuilder Moderate
Assuming the 90 days trading horizon Legg Mason Partners is expected to under-perform the Wealthbuilder Moderate. In addition to that, Legg Mason is 7.46 times more volatile than Wealthbuilder Moderate Balanced. It trades about -0.22 of its total potential returns per unit of risk. Wealthbuilder Moderate Balanced is currently generating about 0.26 per unit of volatility. If you would invest 1,004 in Wealthbuilder Moderate Balanced on September 13, 2024 and sell it today you would earn a total of 17.00 from holding Wealthbuilder Moderate Balanced or generate 1.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Legg Mason Partners vs. Wealthbuilder Moderate Balance
Performance |
| Timeline |
| Legg Mason Partners |
| Wealthbuilder Moderate |
Legg Mason and Wealthbuilder Moderate Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Legg Mason and Wealthbuilder Moderate
The main advantage of trading using opposite Legg Mason and Wealthbuilder Moderate positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Legg Mason position performs unexpectedly, Wealthbuilder Moderate 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 Wealthbuilder Moderate will offset losses from the drop in Wealthbuilder Moderate's long position.| Legg Mason vs. Western Asset Diversified | Legg Mason vs. Pimco Diversified Income | Legg Mason vs. Lord Abbett Diversified | Legg Mason vs. Delaware Limited Term Diversified |
| Wealthbuilder Moderate vs. Wells Fargo Advantage | Wealthbuilder Moderate vs. Wells Fargo Advantage | Wealthbuilder Moderate vs. Wells Fargo Advantage | Wealthbuilder Moderate 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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