Correlation Between Legg Mason and Ultrashort Mid-cap

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

Diversification Opportunities for Legg Mason and Ultrashort Mid-cap

-0.87

Correlation Coefficient

Legg Mason  Ultrashort Mid-cap

Pay attention - limited upside

The 3 months correlation between Legg and Ultrashort is -0.87. Overlapping area represents the amount of risk that can be diversified away by holding Legg Mason Partners and Ultrashort Mid Cap Profund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ultrashort Mid Cap 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 Ultrashort Mid-cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ultrashort Mid Cap has no effect on the direction of Legg Mason i.e., Legg Mason and Ultrashort Mid-cap go up and down completely randomly.

Pair Corralation between Legg Mason and Ultrashort Mid-cap

Assuming the 90 days trading horizon Legg Mason Partners is expected to generate 0.08 times more return on investment than Ultrashort Mid-cap. However, Legg Mason Partners is 12.58 times less risky than Ultrashort Mid-cap. It trades about 0.43 of its potential returns per unit of risk. Ultrashort Mid Cap Profund is currently generating about -0.11 per unit of risk. If you would invest  620.00  in Legg Mason Partners on May 25, 2025 and sell it today you would earn a total of  24.00  from holding Legg Mason Partners or generate 3.87% return on investment over 90 days.

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

Legg Mason Partners  vs.  Ultrashort Mid Cap Profund

Legg Mason Partners

Risk-Adjusted Performance

High

Compared to the overall equity markets, risk-adjusted returns on investments in Legg Mason Partners are ranked lower than 33 (%) 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.

Ultrashort Mid Cap

Risk-Adjusted Performance

Weakest

Over the last 90 days Ultrashort Mid Cap Profund has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Legg Mason and Ultrashort Mid-cap

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

The idea behind Legg Mason Partners and Ultrashort Mid Cap Profund 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.