Correlation Between Legg Mason and Firsthand Alternative
Can any of the company-specific risk be diversified away by investing in both Legg Mason and Firsthand Alternative 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 Firsthand Alternative 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 Firsthand Alternative Energy, you can compare the effects of market volatilities on Legg Mason and Firsthand Alternative 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 Firsthand Alternative. Check out your portfolio center. Please also check ongoing floating volatility patterns of Legg Mason and Firsthand Alternative.
Diversification Opportunities for Legg Mason and Firsthand Alternative
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Legg and Firsthand is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Legg Mason Partners and Firsthand Alternative Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Firsthand Alternative 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 Firsthand Alternative. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Firsthand Alternative has no effect on the direction of Legg Mason i.e., Legg Mason and Firsthand Alternative go up and down completely randomly.
Pair Corralation between Legg Mason and Firsthand Alternative
Assuming the 90 days trading horizon Legg Mason is expected to generate 4.85 times less return on investment than Firsthand Alternative. But when comparing it to its historical volatility, Legg Mason Partners is 5.62 times less risky than Firsthand Alternative. It trades about 0.11 of its potential returns per unit of risk. Firsthand Alternative Energy is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 1,079 in Firsthand Alternative Energy on September 5, 2025 and sell it today you would earn a total of 151.00 from holding Firsthand Alternative Energy or generate 13.99% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Legg Mason Partners vs. Firsthand Alternative Energy
Performance |
| Timeline |
| Legg Mason Partners |
| Firsthand Alternative |
Legg Mason and Firsthand Alternative Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Legg Mason and Firsthand Alternative
The main advantage of trading using opposite Legg Mason and Firsthand Alternative positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Legg Mason position performs unexpectedly, Firsthand Alternative 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 Firsthand Alternative will offset losses from the drop in Firsthand Alternative's long position.| Legg Mason vs. Rationalrgn Hedged Equity | Legg Mason vs. The Gabelli Equity | Legg Mason vs. Qs International Equity | Legg Mason vs. Cutler Equity |
| Firsthand Alternative vs. Fidelity Advisor Health | Firsthand Alternative vs. Eventide Healthcare Life | Firsthand Alternative vs. Blackrock Health Sciences | Firsthand Alternative vs. Invesco Global Health |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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