Correlation Between Legg Mason and Great-west Lifetime

Can any of the company-specific risk be diversified away by investing in both Legg Mason and Great-west Lifetime 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 Great-west Lifetime 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 Great West Lifetime 2045, you can compare the effects of market volatilities on Legg Mason and Great-west Lifetime 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 Great-west Lifetime. Check out your portfolio center. Please also check ongoing floating volatility patterns of Legg Mason and Great-west Lifetime.

Diversification Opportunities for Legg Mason and Great-west Lifetime

0.65

Correlation Coefficient

Legg Mason  Great-west Lifetime

Poor diversification

The 3 months correlation between Legg and Great-west is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Legg Mason Partners and Great West Lifetime 2045 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Great West Lifetime 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 Great-west Lifetime. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Great West Lifetime has no effect on the direction of Legg Mason i.e., Legg Mason and Great-west Lifetime go up and down completely randomly.

Pair Corralation between Legg Mason and Great-west Lifetime

Assuming the 90 days trading horizon Legg Mason Partners is expected to under-perform the Great-west Lifetime. But the fund apears to be less risky and, when comparing its historical volatility, Legg Mason Partners is 1.52 times less risky than Great-west Lifetime. The fund trades about -0.02 of its potential returns per unit of risk. The Great West Lifetime 2045 is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  1,414  in Great West Lifetime 2045 on December 30, 2024 and sell it today you would lose (4.00) from holding Great West Lifetime 2045 or give up 0.28% of portfolio value over 90 days.

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

Legg Mason Partners  vs.  Great West Lifetime 2045

Legg Mason Partners

Risk-Adjusted Performance

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.

Great West Lifetime

Risk-Adjusted Performance

Very Weak

Over the last 90 days Great West Lifetime 2045 has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong essential indicators, Great-west Lifetime 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 Great-west Lifetime

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

The idea behind Legg Mason Partners and Great West Lifetime 2045 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.