Correlation Between Legg Mason and Angel Oak

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

Diversification Opportunities for Legg Mason and Angel Oak

-0.67
  Correlation Coefficient

Excellent diversification

The 3 months correlation between Legg and Angel is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Legg Mason Partners and Angel Oak Multi Strategy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Angel Oak Multi 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 Angel Oak. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Angel Oak Multi has no effect on the direction of Legg Mason i.e., Legg Mason and Angel Oak go up and down completely randomly.

Pair Corralation between Legg Mason and Angel Oak

Assuming the 90 days trading horizon Legg Mason Partners is expected to under-perform the Angel Oak. In addition to that, Legg Mason is 10.74 times more volatile than Angel Oak Multi Strategy. It trades about -0.02 of its total potential returns per unit of risk. Angel Oak Multi Strategy is currently generating about -0.08 per unit of volatility. If you would invest  865.00  in Angel Oak Multi Strategy on September 10, 2024 and sell it today you would lose (6.00) from holding Angel Oak Multi Strategy or give up 0.69% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Legg Mason Partners  vs.  Angel Oak Multi Strategy

 Performance 
       Timeline  
Legg Mason Partners 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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.
Angel Oak Multi 

Risk-Adjusted Performance

0 of 100

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

Legg Mason and Angel Oak Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Legg Mason and Angel Oak

The main advantage of trading using opposite Legg Mason and Angel Oak positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Legg Mason position performs unexpectedly, Angel Oak 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 Angel Oak will offset losses from the drop in Angel Oak's long position.
The idea behind Legg Mason Partners and Angel Oak Multi Strategy 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.

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