Correlation Between Boeing and Legg Mason

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

By analyzing existing cross correlation between The Boeing and Legg Mason Partners, you can compare the effects of market volatilities on Boeing and Legg Mason 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 Boeing with a short position of Legg Mason. Check out your portfolio center. Please also check ongoing floating volatility patterns of Boeing and Legg Mason.

Diversification Opportunities for Boeing and Legg Mason

-0.76

Correlation Coefficient

Boeing  Legg Mason

Pay attention - limited upside

The 3 months correlation between Boeing and Legg is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding The Boeing and Legg Mason Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Legg Mason Partners and Boeing 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 The Boeing are associated (or correlated) with Legg Mason. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Legg Mason Partners has no effect on the direction of Boeing i.e., Boeing and Legg Mason go up and down completely randomly.

Pair Corralation between Boeing and Legg Mason

Allowing for the 90-day total investment horizon The Boeing is expected to generate 2.45 times more return on investment than Legg Mason. However, Boeing is 2.45 times more volatile than Legg Mason Partners. It trades about 0.09 of its potential returns per unit of risk. Legg Mason Partners is currently generating about -0.12 per unit of risk. If you would invest  15,465  in The Boeing on October 8, 2024 and sell it today you would earn a total of  1,525  from holding The Boeing or generate 9.86% return on investment over 90 days.

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

The Boeing  vs.  Legg Mason Partners

Boeing

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in The Boeing are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Boeing may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Legg Mason Partners

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Legg Mason Partners has generated negative risk-adjusted returns adding no value to fund investors. 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.

Pair Trading with Boeing and Legg Mason

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

The idea behind The Boeing and Legg Mason Partners 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.