Correlation Between Legg Mason and Western Asset

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

Diversification Opportunities for Legg Mason and Western Asset

-0.65

Correlation Coefficient

Legg Mason  Western Asset

Excellent diversification

The 3 months correlation between Legg and Western is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Legg Mason Partners and Western Asset Porate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Asset Porate 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 Western Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Asset Porate has no effect on the direction of Legg Mason i.e., Legg Mason and Western Asset go up and down completely randomly.

Pair Corralation between Legg Mason and Western Asset

Assuming the 90 days trading horizon Legg Mason Partners is expected to generate 1.88 times more return on investment than Western Asset. However, Legg Mason is 1.88 times more volatile than Western Asset Porate. It trades about 0.19 of its potential returns per unit of risk. Western Asset Porate is currently generating about -0.05 per unit of risk. If you would invest  2,280  in Legg Mason Partners on September 4, 2024 and sell it today you would earn a total of  174.00  from holding Legg Mason Partners or generate 7.63% return on investment over 90 days.

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

Legg Mason Partners  vs.  Western Asset Porate

Legg Mason Partners

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Legg Mason Partners are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak primary indicators, Legg Mason may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Western Asset Porate

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Western Asset Porate has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong essential indicators, Western Asset 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 Western Asset

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

The idea behind Legg Mason Partners and Western Asset Porate 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.