Correlation Between Legg Mason and Davenport Core

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

Diversification Opportunities for Legg Mason and Davenport Core

0.16

Correlation Coefficient

Legg Mason  Davenport Core

Average diversification

The 3 months correlation between Legg and Davenport is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Legg Mason Partners and Davenport E Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Davenport E Fund 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 Davenport Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Davenport E Fund has no effect on the direction of Legg Mason i.e., Legg Mason and Davenport Core go up and down completely randomly.

Pair Corralation between Legg Mason and Davenport Core

If you would invest  3,659  in Davenport E Fund on September 5, 2024 and sell it today you would earn a total of  221.00  from holding Davenport E Fund or generate 6.04% return on investment over 90 days.

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

Legg Mason Partners  vs.  Davenport E Fund

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 basic indicators, Legg Mason is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Davenport E Fund

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Davenport E Fund are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Davenport Core may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Legg Mason and Davenport Core

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

The idea behind Legg Mason Partners and Davenport E Fund 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..