Correlation Between Leggmason Partners and Inverse High

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

Diversification Opportunities for Leggmason Partners and Inverse High

0.0

Correlation Coefficient

Leggmason Partners  Inverse High

Pay attention - limited upside

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

Pair Corralation between Leggmason Partners and Inverse High

Assuming the 90 days horizon Leggmason Partners Institutional is expected to generate 1.59 times more return on investment than Inverse High. However, Leggmason Partners is 1.59 times more volatile than Inverse High Yield. It trades about 0.02 of its potential returns per unit of risk. Inverse High Yield is currently generating about -0.02 per unit of risk. If you would invest  95.00  in Leggmason Partners Institutional on September 20, 2024 and sell it today you would earn a total of  5.00  from holding Leggmason Partners Institutional or generate 5.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	99.0%
Values	Daily Returns

Leggmason Partners Institution  vs.  Inverse High Yield

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.

Inverse High Yield

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Inverse High Yield are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical indicators, Inverse High 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 Inverse High

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

The idea behind Leggmason Partners Institutional and Inverse High Yield 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.

Check out your portfolio center.

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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.