Correlation Between Legg Mason and Pnc International

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

Diversification Opportunities for Legg Mason and Pnc International

0.59

Correlation Coefficient

Legg Mason  Pnc International

Very weak diversification

The 3 months correlation between Legg and Pnc is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Legg Mason Partners and Pnc International Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pnc International 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 Pnc International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pnc International Equity has no effect on the direction of Legg Mason i.e., Legg Mason and Pnc International go up and down completely randomly.

Pair Corralation between Legg Mason and Pnc International

Assuming the 90 days trading horizon Legg Mason Partners is expected to generate 1.09 times more return on investment than Pnc International. However, Legg Mason is 1.09 times more volatile than Pnc International Equity. It trades about 0.11 of its potential returns per unit of risk. Pnc International Equity is currently generating about 0.06 per unit of risk. If you would invest  2,144  in Legg Mason Partners on October 22, 2024 and sell it today you would earn a total of  28.00  from holding Legg Mason Partners or generate 1.31% return on investment over 90 days.

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

Legg Mason Partners  vs.  Pnc International 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 latest weak performance, the Fund's primary indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pnc International Equity

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pnc International Equity has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's forward indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Legg Mason and Pnc International

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

The idea behind Legg Mason Partners and Pnc International 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.

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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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.