Correlation Between Visa and Legg Mason
Can any of the company-specific risk be diversified away by investing in both Visa and Legg Mason 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 Visa and Legg Mason into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Visa Class A and Legg Mason Bw, you can compare the effects of market volatilities on Visa and Legg Mason 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 Visa with a short position of Legg Mason. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and Legg Mason.
Diversification Opportunities for Visa and Legg Mason
0.26 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Visa and Legg is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Legg Mason Bw in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Legg Mason Bw and Visa 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 Visa Class A are associated (or correlated) with Legg Mason. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Legg Mason Bw has no effect on the direction of Visa i.e., Visa and Legg Mason go up and down completely randomly.
Pair Corralation between Visa and Legg Mason
Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.95 times more return on investment than Legg Mason. However, Visa Class A is 1.05 times less risky than Legg Mason. It trades about -0.14 of its potential returns per unit of risk. Legg Mason Bw is currently generating about -0.27 per unit of risk. If you would invest 28,060 in Visa Class A on January 26, 2024 and sell it today you would lose (558.00) from holding Visa Class A or give up 1.99% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Visa Class A vs. Legg Mason Bw
Performance |
| Timeline |
| Visa Class A |
| Legg Mason Bw |
Visa and Legg Mason Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Visa and Legg Mason
The main advantage of trading using opposite Visa and Legg Mason positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, Legg Mason 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 Legg Mason will offset losses from the drop in Legg Mason's long position.The idea behind Visa Class A and Legg Mason Bw 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.| Legg Mason vs. Elfun Government Money | Legg Mason vs. Matson Money Equity | Legg Mason vs. Goldman Sachs Trust | Legg Mason vs. Franklin Government Money |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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