Correlation Between Legg Mason and 361 Global

Can any of the company-specific risk be diversified away by investing in both Legg Mason and 361 Global 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 361 Global into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Legg Mason Global and 361 Global Longshort, you can compare the effects of market volatilities on Legg Mason and 361 Global 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 361 Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of Legg Mason and 361 Global.

Diversification Opportunities for Legg Mason and 361 Global

-0.03

Correlation Coefficient

Legg Mason  361 Global

Good diversification

The 3 months correlation between Legg and 361 is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Legg Mason Global and 361 Global Longshort in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 361 Global Longshort 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 Global are associated (or correlated) with 361 Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 361 Global Longshort has no effect on the direction of Legg Mason i.e., Legg Mason and 361 Global go up and down completely randomly.

Pair Corralation between Legg Mason and 361 Global

Assuming the 90 days horizon Legg Mason is expected to generate 1.38 times less return on investment than 361 Global. But when comparing it to its historical volatility, Legg Mason Global is 1.75 times less risky than 361 Global. It trades about 0.03 of its potential returns per unit of risk. 361 Global Longshort is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  1,271  in 361 Global Longshort on September 3, 2024 and sell it today you would earn a total of  7.00  from holding 361 Global Longshort or generate 0.55% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Legg Mason Global  vs.  361 Global Longshort

Legg Mason Global

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Legg Mason Global are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Legg Mason is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

361 Global Longshort

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in 361 Global Longshort are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, 361 Global is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Legg Mason and 361 Global

The main advantage of trading using opposite Legg Mason and 361 Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Legg Mason position performs unexpectedly, 361 Global 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 361 Global will offset losses from the drop in 361 Global's long position.

The idea behind Legg Mason Global and 361 Global Longshort 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.

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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.