Correlation Between Legg Mason and Artisan Mid

Can any of the company-specific risk be diversified away by investing in both Legg Mason and Artisan Mid 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 Artisan Mid 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 Artisan Mid Cap, you can compare the effects of market volatilities on Legg Mason and Artisan Mid 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 Artisan Mid. Check out your portfolio center. Please also check ongoing floating volatility patterns of Legg Mason and Artisan Mid.

Diversification Opportunities for Legg Mason and Artisan Mid

-0.43

Correlation Coefficient

Legg Mason  Artisan Mid

Very good diversification

The 3 months correlation between Legg and Artisan is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Legg Mason Global and Artisan Mid Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Artisan Mid 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 Global are associated (or correlated) with Artisan Mid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Artisan Mid Cap has no effect on the direction of Legg Mason i.e., Legg Mason and Artisan Mid go up and down completely randomly.

Pair Corralation between Legg Mason and Artisan Mid

Assuming the 90 days horizon Legg Mason is expected to generate 67.08 times less return on investment than Artisan Mid. But when comparing it to its historical volatility, Legg Mason Global is 4.0 times less risky than Artisan Mid. It trades about 0.02 of its potential returns per unit of risk. Artisan Mid Cap is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest  4,197  in Artisan Mid Cap on September 4, 2024 and sell it today you would earn a total of  687.00  from holding Artisan Mid Cap or generate 16.37% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Legg Mason Global  vs.  Artisan Mid Cap

Legg Mason Global

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Legg Mason Global are ranked lower than 1 (%) 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.

Artisan Mid Cap

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Artisan Mid Cap are ranked lower than 20 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak primary indicators, Artisan Mid showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Legg Mason and Artisan Mid

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

The idea behind Legg Mason Global and Artisan Mid 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.

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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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.