Correlation Between Franklin Federal and Legg Mason
Can any of the company-specific risk be diversified away by investing in both Franklin Federal 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 Franklin Federal and Legg Mason into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Franklin Federal Limited Term and Legg Mason Partners, you can compare the effects of market volatilities on Franklin Federal 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 Franklin Federal with a short position of Legg Mason. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin Federal and Legg Mason.
Diversification Opportunities for Franklin Federal and Legg Mason
0.39 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Franklin and Legg is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Federal Limited Term and Legg Mason Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Legg Mason Partners and Franklin Federal 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 Franklin Federal Limited Term 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 Partners has no effect on the direction of Franklin Federal i.e., Franklin Federal and Legg Mason go up and down completely randomly.
Pair Corralation between Franklin Federal and Legg Mason
Assuming the 90 days horizon Franklin Federal is expected to generate 12.22 times less return on investment than Legg Mason. But when comparing it to its historical volatility, Franklin Federal Limited Term is 5.67 times less risky than Legg Mason. It trades about 0.15 of its potential returns per unit of risk. Legg Mason Partners is currently generating about 0.33 of returns per unit of risk over similar time horizon. If you would invest 2,348 in Legg Mason Partners on September 1, 2024 and sell it today you would earn a total of 119.00 from holding Legg Mason Partners or generate 5.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Franklin Federal Limited Term vs. Legg Mason Partners
Performance |
| Timeline |
| Franklin Federal Lim |
| Legg Mason Partners |
Franklin Federal and Legg Mason Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Franklin Federal and Legg Mason
The main advantage of trading using opposite Franklin Federal and Legg Mason positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin Federal 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.| Franklin Federal vs. Small Midcap Dividend Income | Franklin Federal vs. Tax Managed Mid Small | Franklin Federal vs. Touchstone Small Cap | Franklin Federal vs. Jpmorgan Small Cap |
| Legg Mason vs. Siit Ultra Short | Legg Mason vs. Franklin Federal Limited Term | Legg Mason vs. The Short Term | Legg Mason vs. Maryland Short Term Tax Free |
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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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