Correlation Between Legg Mason and Amcap Fund
Can any of the company-specific risk be diversified away by investing in both Legg Mason and Amcap Fund 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 Amcap Fund into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Legg Mason Bw and Amcap Fund Class, you can compare the effects of market volatilities on Legg Mason and Amcap Fund 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 Amcap Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Legg Mason and Amcap Fund.
Diversification Opportunities for Legg Mason and Amcap Fund
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Legg and Amcap is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Legg Mason Bw and Amcap Fund Class in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amcap Fund Class 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 Bw are associated (or correlated) with Amcap Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amcap Fund Class has no effect on the direction of Legg Mason i.e., Legg Mason and Amcap Fund go up and down completely randomly.
Pair Corralation between Legg Mason and Amcap Fund
Assuming the 90 days horizon Legg Mason Bw is expected to generate 0.83 times more return on investment than Amcap Fund. However, Legg Mason Bw is 1.2 times less risky than Amcap Fund. It trades about 0.12 of its potential returns per unit of risk. Amcap Fund Class is currently generating about 0.09 per unit of risk. If you would invest 1,726 in Legg Mason Bw on September 4, 2024 and sell it today you would earn a total of 648.00 from holding Legg Mason Bw or generate 37.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.73% |
| Values | Daily Returns |
Legg Mason Bw vs. Amcap Fund Class
Performance |
| Timeline |
| Legg Mason Bw |
| Amcap Fund Class |
Legg Mason and Amcap Fund Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Legg Mason and Amcap Fund
The main advantage of trading using opposite Legg Mason and Amcap Fund positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Legg Mason position performs unexpectedly, Amcap Fund 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 Amcap Fund will offset losses from the drop in Amcap Fund's long position.| Legg Mason vs. Clearbridge Aggressive Growth | Legg Mason vs. Clearbridge Small Cap | Legg Mason vs. Qs International Equity | Legg Mason vs. Clearbridge Appreciation Fund |
| Amcap Fund vs. The Hartford Small | Amcap Fund vs. Ab Small Cap | Amcap Fund vs. Small Cap Value | Amcap Fund vs. Baird Smallmid Cap |
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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