Correlation Between Leggmason Partners and Multi Strategy

Can any of the company-specific risk be diversified away by investing in both Leggmason Partners and Multi Strategy 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 Multi Strategy 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 The Multi Strategy Growth, you can compare the effects of market volatilities on Leggmason Partners and Multi Strategy 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 Multi Strategy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Leggmason Partners and Multi Strategy.

Diversification Opportunities for Leggmason Partners and Multi Strategy

0.0

Correlation Coefficient

Leggmason Partners  Multi Strategy

Pay attention - limited upside

The 3 months correlation between Leggmason and Multi is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Leggmason Partners Institution and The Multi Strategy Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Multi Strategy 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 Multi Strategy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Multi Strategy has no effect on the direction of Leggmason Partners i.e., Leggmason Partners and Multi Strategy go up and down completely randomly.

Pair Corralation between Leggmason Partners and Multi Strategy

Assuming the 90 days horizon Leggmason Partners Institutional is expected to generate 0.22 times more return on investment than Multi Strategy. However, Leggmason Partners Institutional is 4.56 times less risky than Multi Strategy. It trades about 0.09 of its potential returns per unit of risk. The Multi Strategy Growth is currently generating about 0.02 per unit of risk. If you would invest  99.00  in Leggmason Partners Institutional on September 30, 2024 and sell it today you would earn a total of  1.00  from holding Leggmason Partners Institutional or generate 1.01% return on investment over 90 days.

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

Leggmason Partners Institution  vs.  The Multi Strategy Growth

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.

Multi Strategy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The Multi Strategy Growth has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Multi Strategy is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Leggmason Partners and Multi Strategy

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

The idea behind Leggmason Partners Institutional and The Multi Strategy Growth 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.