Correlation Between Leggmason Partners and Materials Portfolio

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

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

Diversification Opportunities for Leggmason Partners and Materials Portfolio

0.15

Correlation Coefficient

Leggmason Partners  Materials Portfolio

Average diversification

The 3 months correlation between Leggmason and Materials is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Leggmason Partners Institution and Materials Portfolio Fidelity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Materials Portfolio and Leggmason Partners 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 Leggmason Partners Institutional are associated (or correlated) with Materials Portfolio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Materials Portfolio has no effect on the direction of Leggmason Partners i.e., Leggmason Partners and Materials Portfolio go up and down completely randomly.

Pair Corralation between Leggmason Partners and Materials Portfolio

If you would invest  9,578  in Materials Portfolio Fidelity on August 31, 2024 and sell it today you would earn a total of  603.00  from holding Materials Portfolio Fidelity or generate 6.3% return on investment over 90 days.

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

Leggmason Partners Institution  vs.  Materials Portfolio Fidelity

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.

Materials Portfolio

Risk-Adjusted Performance

8 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Materials Portfolio Fidelity are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Materials Portfolio may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Leggmason Partners and Materials Portfolio

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

The idea behind Leggmason Partners Institutional and Materials Portfolio Fidelity 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.