Correlation Between Ford and Leggmason Partners

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

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

Diversification Opportunities for Ford and Leggmason Partners

0.0

Correlation Coefficient

Ford  Leggmason Partners

Pay attention - limited upside

The 3 months correlation between Ford and Leggmason is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Leggmason Partners Institution in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Leggmason Partners and Ford 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 Ford Motor are associated (or correlated) with Leggmason Partners. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Leggmason Partners has no effect on the direction of Ford i.e., Ford and Leggmason Partners go up and down completely randomly.

Pair Corralation between Ford and Leggmason Partners

Taking into account the 90-day investment horizon Ford is expected to generate 111.38 times less return on investment than Leggmason Partners. But when comparing it to its historical volatility, Ford Motor is 6.59 times less risky than Leggmason Partners. It trades about 0.0 of its potential returns per unit of risk. Leggmason Partners Institutional is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  152.00  in Leggmason Partners Institutional on October 25, 2024 and sell it today you would lose (52.00) from holding Leggmason Partners Institutional or give up 34.21% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	99.2%
Values	Daily Returns

Ford Motor  vs.  Leggmason Partners Institution

Ford Motor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ford Motor has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Ford is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Leggmason Partners

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Leggmason Partners Institutional has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Leggmason Partners is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Ford and Leggmason Partners

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

The idea behind Ford Motor and Leggmason Partners Institutional 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.