Correlation Between Legg Mason and Wasatch Large
Can any of the company-specific risk be diversified away by investing in both Legg Mason and Wasatch Large 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 Large 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 Large Cap, you can compare the effects of market volatilities on Legg Mason and Wasatch Large 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 Large. Check out your portfolio center. Please also check ongoing floating volatility patterns of Legg Mason and Wasatch Large.
Diversification Opportunities for Legg Mason and Wasatch Large
0.26 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Legg and Wasatch is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Legg Mason Partners and Wasatch Large Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wasatch Large Cap 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 Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wasatch Large Cap has no effect on the direction of Legg Mason i.e., Legg Mason and Wasatch Large go up and down completely randomly.
Pair Corralation between Legg Mason and Wasatch Large
Assuming the 90 days trading horizon Legg Mason Partners is expected to generate 0.36 times more return on investment than Wasatch Large. However, Legg Mason Partners is 2.77 times less risky than Wasatch Large. It trades about 0.24 of its potential returns per unit of risk. Wasatch Large Cap is currently generating about 0.04 per unit of risk. If you would invest 655.00 in Legg Mason Partners on September 3, 2024 and sell it today you would earn a total of 18.00 from holding Legg Mason Partners or generate 2.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Legg Mason Partners vs. Wasatch Large Cap
Performance |
| Timeline |
| Legg Mason Partners |
| Wasatch Large Cap |
Legg Mason and Wasatch Large Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Legg Mason and Wasatch Large
The main advantage of trading using opposite Legg Mason and Wasatch Large positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Legg Mason position performs unexpectedly, Wasatch Large 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 Large will offset losses from the drop in Wasatch Large's long position.The idea behind Legg Mason Partners and Wasatch Large Cap pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Wasatch Large vs. Wasatch Small Cap | Wasatch Large vs. Wasatch Small Cap | Wasatch Large vs. Wasatch Frontier Emerging | Wasatch Large vs. Wasatch Emerging Markets |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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