Correlation Between Legg Mason and Lazard Capital

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

Diversification Opportunities for Legg Mason and Lazard Capital

0.86

Correlation Coefficient

Legg Mason  Lazard Capital

Very poor diversification

The 3 months correlation between Legg and Lazard is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Legg Mason Partners and Lazard Capital Allocator in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lazard Capital Allocator 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 Lazard Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lazard Capital Allocator has no effect on the direction of Legg Mason i.e., Legg Mason and Lazard Capital go up and down completely randomly.

Pair Corralation between Legg Mason and Lazard Capital

Assuming the 90 days trading horizon Legg Mason is expected to generate 1.38 times less return on investment than Lazard Capital. But when comparing it to its historical volatility, Legg Mason Partners is 3.14 times less risky than Lazard Capital. It trades about 0.26 of its potential returns per unit of risk. Lazard Capital Allocator is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  1,100  in Lazard Capital Allocator on July 24, 2025 and sell it today you would earn a total of  43.00  from holding Lazard Capital Allocator or generate 3.91% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.44%
Values	Daily Returns

Legg Mason Partners  vs.  Lazard Capital Allocator

Legg Mason Partners

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Legg Mason Partners are ranked lower than 20 (%) of all funds and portfolios of funds over the last 90 days. 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.

Lazard Capital Allocator

Risk-Adjusted Performance

Fair

Compared to the overall equity markets, risk-adjusted returns on investments in Lazard Capital Allocator are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Lazard Capital 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 Lazard Capital

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

The idea behind Legg Mason Partners and Lazard Capital Allocator 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.