Correlation Between Value Fund and Legg Mason
Can any of the company-specific risk be diversified away by investing in both Value Fund 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 Value Fund and Legg Mason into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Value Fund R and Legg Mason Bw, you can compare the effects of market volatilities on Value Fund 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 Value Fund with a short position of Legg Mason. Check out your portfolio center. Please also check ongoing floating volatility patterns of Value Fund and Legg Mason.
Diversification Opportunities for Value Fund and Legg Mason
0.98 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Value and Legg is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Value Fund R 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 Value Fund 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 Value Fund R 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 Value Fund i.e., Value Fund and Legg Mason go up and down completely randomly.
Pair Corralation between Value Fund and Legg Mason
Assuming the 90 days horizon Value Fund is expected to generate 2.18 times less return on investment than Legg Mason. But when comparing it to its historical volatility, Value Fund R is 1.05 times less risky than Legg Mason. It trades about 0.08 of its potential returns per unit of risk. Legg Mason Bw is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 1,780 in Legg Mason Bw on September 2, 2024 and sell it today you would earn a total of 608.00 from holding Legg Mason Bw or generate 34.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Value Fund R vs. Legg Mason Bw
Performance |
| Timeline |
| Value Fund R |
| Legg Mason Bw |
Value Fund and Legg Mason Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Value Fund and Legg Mason
The main advantage of trading using opposite Value Fund and Legg Mason positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Value Fund 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.| Value Fund vs. Legg Mason Bw | Value Fund vs. Tax Managed Large Cap | Value Fund vs. Alternative Asset Allocation | Value Fund vs. Strategic Allocation Aggressive |
| Legg Mason vs. Clearbridge Aggressive Growth | Legg Mason vs. Clearbridge Small Cap | Legg Mason vs. Qs International Equity | Legg Mason vs. Clearbridge Appreciation Fund |
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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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