Correlation Between Legg Mason and Fidelity Advisor
Can any of the company-specific risk be diversified away by investing in both Legg Mason and Fidelity Advisor 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 Fidelity Advisor 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 Fidelity Advisor Stock, you can compare the effects of market volatilities on Legg Mason and Fidelity Advisor 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 Fidelity Advisor. Check out your portfolio center. Please also check ongoing floating volatility patterns of Legg Mason and Fidelity Advisor.
Diversification Opportunities for Legg Mason and Fidelity Advisor
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Legg and Fidelity is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Legg Mason Partners and Fidelity Advisor Stock in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Advisor Stock 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 Fidelity Advisor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Advisor Stock has no effect on the direction of Legg Mason i.e., Legg Mason and Fidelity Advisor go up and down completely randomly.
Pair Corralation between Legg Mason and Fidelity Advisor
Assuming the 90 days trading horizon Legg Mason is expected to generate 4.36 times less return on investment than Fidelity Advisor. But when comparing it to its historical volatility, Legg Mason Partners is 5.52 times less risky than Fidelity Advisor. It trades about 0.24 of its potential returns per unit of risk. Fidelity Advisor Stock is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest 3,552 in Fidelity Advisor Stock on September 2, 2024 and sell it today you would earn a total of 435.00 from holding Fidelity Advisor Stock or generate 12.25% 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. Fidelity Advisor Stock
Performance |
| Timeline |
| Legg Mason Partners |
| Fidelity Advisor Stock |
Legg Mason and Fidelity Advisor Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Legg Mason and Fidelity Advisor
The main advantage of trading using opposite Legg Mason and Fidelity Advisor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Legg Mason position performs unexpectedly, Fidelity Advisor 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 Fidelity Advisor will offset losses from the drop in Fidelity Advisor's long position.| Legg Mason vs. Vanguard Total Stock | Legg Mason vs. Vanguard 500 Index | Legg Mason vs. Vanguard Total Stock | Legg Mason vs. Vanguard Total Stock |
| Fidelity Advisor vs. Sterling Capital Short | Fidelity Advisor vs. Ultra Short Fixed Income | Fidelity Advisor vs. Ab Select Longshort | Fidelity Advisor vs. Barings Active Short |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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