Correlation Between Legg Mason and Ubs International

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

Diversification Opportunities for Legg Mason and Ubs International

0.15

Correlation Coefficient

Legg Mason  Ubs International

Average diversification

The 3 months correlation between Legg and Ubs is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Legg Mason Partners and Ubs International Sustainable in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ubs International 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 Ubs International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ubs International has no effect on the direction of Legg Mason i.e., Legg Mason and Ubs International go up and down completely randomly.

Pair Corralation between Legg Mason and Ubs International

Assuming the 90 days trading horizon Legg Mason Partners is expected to generate 0.57 times more return on investment than Ubs International. However, Legg Mason Partners is 1.74 times less risky than Ubs International. It trades about 0.15 of its potential returns per unit of risk. Ubs International Sustainable is currently generating about 0.03 per unit of risk. If you would invest  1,269  in Legg Mason Partners on September 12, 2024 and sell it today you would earn a total of  47.00  from holding Legg Mason Partners or generate 3.7% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Legg Mason Partners  vs.  Ubs International Sustainable

Legg Mason Partners

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Legg Mason Partners are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong primary indicators, Legg Mason is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Ubs International

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ubs International Sustainable are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Ubs International 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 Ubs International

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

The idea behind Legg Mason Partners and Ubs International Sustainable 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.