Correlation Between Legg Mason and Westwood Smallcap
Can any of the company-specific risk be diversified away by investing in both Legg Mason and Westwood Smallcap 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 Westwood Smallcap 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 Westwood Smallcap Growth, you can compare the effects of market volatilities on Legg Mason and Westwood Smallcap 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 Westwood Smallcap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Legg Mason and Westwood Smallcap.
Diversification Opportunities for Legg Mason and Westwood Smallcap
0.19 | Correlation Coefficient |
Average diversification
The 3 months correlation between Legg and Westwood is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Legg Mason Partners and Westwood Smallcap Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Westwood Smallcap Growth 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 Westwood Smallcap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Westwood Smallcap Growth has no effect on the direction of Legg Mason i.e., Legg Mason and Westwood Smallcap go up and down completely randomly.
Pair Corralation between Legg Mason and Westwood Smallcap
Assuming the 90 days trading horizon Legg Mason is expected to generate 1.54 times less return on investment than Westwood Smallcap. But when comparing it to its historical volatility, Legg Mason Partners is 1.05 times less risky than Westwood Smallcap. It trades about 0.04 of its potential returns per unit of risk. Westwood Smallcap Growth is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 770.00 in Westwood Smallcap Growth on September 13, 2024 and sell it today you would earn a total of 36.00 from holding Westwood Smallcap Growth or generate 4.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 13.97% |
| Values | Daily Returns |
Legg Mason Partners vs. Westwood Smallcap Growth
Performance |
| Timeline |
| Legg Mason Partners |
| Westwood Smallcap Growth |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Legg Mason and Westwood Smallcap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Legg Mason and Westwood Smallcap
The main advantage of trading using opposite Legg Mason and Westwood Smallcap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Legg Mason position performs unexpectedly, Westwood Smallcap 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 Westwood Smallcap will offset losses from the drop in Westwood Smallcap'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 |
| Westwood Smallcap vs. Us Government Securities | Westwood Smallcap vs. Lord Abbett Government | Westwood Smallcap vs. Franklin Adjustable Government | Westwood Smallcap vs. Ridgeworth Seix Government |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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