Correlation Between Principal Financial and Legg Mason

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

By analyzing existing cross correlation between Principal Financial Group and Legg Mason, you can compare the effects of market volatilities on Principal Financial 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 Principal Financial with a short position of Legg Mason. Check out your portfolio center. Please also check ongoing floating volatility patterns of Principal Financial and Legg Mason.

Diversification Opportunities for Principal Financial and Legg Mason

0.0

Correlation Coefficient

Principal Financial  Legg Mason

Pay attention - limited upside

The 3 months correlation between Principal and Legg is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Principal Financial Group and Legg Mason in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Legg Mason and Principal Financial 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 Principal Financial Group 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 has no effect on the direction of Principal Financial i.e., Principal Financial and Legg Mason go up and down completely randomly.

Pair Corralation between Principal Financial and Legg Mason

If you would invest (100.00) in Legg Mason on January 26, 2024 and sell it today you would earn a total of  100.00  from holding Legg Mason or generate -100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Principal Financial Group  vs.  Legg Mason

Principal Financial

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Principal Financial Group are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, Principal Financial is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Legg Mason

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Legg Mason has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy primary indicators, Legg Mason is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Principal Financial and Legg Mason

The main advantage of trading using opposite Principal Financial and Legg Mason positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Principal Financial 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 Principal Financial Group and Legg Mason 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.