Correlation Between Legg Mason and Aristotle Growth

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

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

Diversification Opportunities for Legg Mason and Aristotle Growth

0.58

Correlation Coefficient

Legg Mason  Aristotle Growth

Very weak diversification

The 3 months correlation between Legg and Aristotle is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Legg Mason Partners and Aristotle Growth Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aristotle Growth Equity 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 Partners are associated (or correlated) with Aristotle Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aristotle Growth Equity has no effect on the direction of Legg Mason i.e., Legg Mason and Aristotle Growth go up and down completely randomly.

Pair Corralation between Legg Mason and Aristotle Growth

Assuming the 90 days trading horizon Legg Mason Partners is expected to generate 0.5 times more return on investment than Aristotle Growth. However, Legg Mason Partners is 1.98 times less risky than Aristotle Growth. It trades about 0.0 of its potential returns per unit of risk. Aristotle Growth Equity is currently generating about 0.0 per unit of risk. If you would invest  1,555  in Legg Mason Partners on October 7, 2024 and sell it today you would lose (1.00) from holding Legg Mason Partners or give up 0.06% of portfolio value over 90 days.

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

Legg Mason Partners  vs.  Aristotle Growth Equity

Legg Mason Partners

Risk-Adjusted Performance

0 of 100

Very Weak

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

Aristotle Growth Equity

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aristotle Growth Equity has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Aristotle Growth 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 Aristotle Growth

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

The idea behind Legg Mason Partners and Aristotle Growth Equity 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.