Correlation Between Gold Portfolio and Legg Mason

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

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

Diversification Opportunities for Gold Portfolio and Legg Mason

0.85

Correlation Coefficient

Gold Portfolio  Legg Mason

Very poor diversification

The 3 months correlation between Gold and Legg is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Gold Portfolio Fidelity 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 Gold Portfolio 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 Gold Portfolio Fidelity 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 Gold Portfolio i.e., Gold Portfolio and Legg Mason go up and down completely randomly.

Pair Corralation between Gold Portfolio and Legg Mason

Assuming the 90 days horizon Gold Portfolio Fidelity is expected to generate 9.15 times more return on investment than Legg Mason. However, Gold Portfolio is 9.15 times more volatile than Legg Mason Partners. It trades about 0.32 of its potential returns per unit of risk. Legg Mason Partners is currently generating about 0.18 per unit of risk. If you would invest  2,358  in Gold Portfolio Fidelity on December 28, 2024 and sell it today you would earn a total of  819.00  from holding Gold Portfolio Fidelity or generate 34.73% return on investment over 90 days.

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

Gold Portfolio Fidelity  vs.  Legg Mason Partners

Gold Portfolio Fidelity

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Gold Portfolio Fidelity are ranked lower than 24 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Gold Portfolio showed solid returns over the last few months and may actually be approaching a breakup point.

Legg Mason Partners

Risk-Adjusted Performance

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 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 Gold Portfolio and Legg Mason

The main advantage of trading using opposite Gold Portfolio and Legg Mason positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gold Portfolio 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 Gold Portfolio Fidelity 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.