Correlation Between Legg Mason and Blackrock New

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

By analyzing existing cross correlation between Legg Mason Global and Blackrock New York, you can compare the effects of market volatilities on Legg Mason and Blackrock New 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 Blackrock New. Check out your portfolio center. Please also check ongoing floating volatility patterns of Legg Mason and Blackrock New.

Diversification Opportunities for Legg Mason and Blackrock New

0.51

Correlation Coefficient

Legg Mason  Blackrock New

Very weak diversification

The 3 months correlation between Legg and Blackrock is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Legg Mason Global and Blackrock New York in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blackrock New York 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 Global are associated (or correlated) with Blackrock New. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Blackrock New York has no effect on the direction of Legg Mason i.e., Legg Mason and Blackrock New go up and down completely randomly.

Pair Corralation between Legg Mason and Blackrock New

Assuming the 90 days horizon Legg Mason Global is expected to generate 0.79 times more return on investment than Blackrock New. However, Legg Mason Global is 1.26 times less risky than Blackrock New. It trades about 0.16 of its potential returns per unit of risk. Blackrock New York is currently generating about -0.04 per unit of risk. If you would invest  914.00  in Legg Mason Global on December 29, 2024 and sell it today you would earn a total of  18.00  from holding Legg Mason Global or generate 1.97% return on investment over 90 days.

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

Legg Mason Global  vs.  Blackrock New York

Legg Mason Global

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Legg Mason Global are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Legg Mason is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Blackrock New York

Risk-Adjusted Performance

Very Weak

Over the last 90 days Blackrock New York has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward-looking signals, Blackrock New 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 Blackrock New

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

The idea behind Legg Mason Global and Blackrock New York 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.