Correlation Between Legg Mason and Fidelity Series

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

By analyzing existing cross correlation between Legg Mason Bw and Fidelity Series 0 5, you can compare the effects of market volatilities on Legg Mason and Fidelity Series 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 Fidelity Series. Check out your portfolio center. Please also check ongoing floating volatility patterns of Legg Mason and Fidelity Series.

Diversification Opportunities for Legg Mason and Fidelity Series

0.35

Correlation Coefficient

Legg Mason  Fidelity Series

Weak diversification

The 3 months correlation between Legg and Fidelity is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Legg Mason Bw and Fidelity Series 0 5 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Series 0 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 Bw are associated (or correlated) with Fidelity Series. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Series 0 has no effect on the direction of Legg Mason i.e., Legg Mason and Fidelity Series go up and down completely randomly.

Pair Corralation between Legg Mason and Fidelity Series

Assuming the 90 days horizon Legg Mason Bw is expected to generate 7.09 times more return on investment than Fidelity Series. However, Legg Mason is 7.09 times more volatile than Fidelity Series 0 5. It trades about 0.05 of its potential returns per unit of risk. Fidelity Series 0 5 is currently generating about 0.36 per unit of risk. If you would invest  2,028  in Legg Mason Bw on December 26, 2024 and sell it today you would earn a total of  48.00  from holding Legg Mason Bw or generate 2.37% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.36%
Values	Daily Returns

Legg Mason Bw  vs.  Fidelity Series 0 5

Legg Mason Bw

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Legg Mason Bw are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. 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.

Fidelity Series 0

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Series 0 5 are ranked lower than 28 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Fidelity Series 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 Fidelity Series

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

The idea behind Legg Mason Bw and Fidelity Series 0 5 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.