Correlation Between Legg Mason and Aggressive Allocation
Can any of the company-specific risk be diversified away by investing in both Legg Mason and Aggressive Allocation 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 Aggressive Allocation 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 Aggressive Allocation Fund, you can compare the effects of market volatilities on Legg Mason and Aggressive Allocation 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 Aggressive Allocation. Check out your portfolio center. Please also check ongoing floating volatility patterns of Legg Mason and Aggressive Allocation.
Diversification Opportunities for Legg Mason and Aggressive Allocation
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Legg and Aggressive is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Legg Mason Bw and Aggressive Allocation Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aggressive Allocation 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 Aggressive Allocation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aggressive Allocation has no effect on the direction of Legg Mason i.e., Legg Mason and Aggressive Allocation go up and down completely randomly.
Pair Corralation between Legg Mason and Aggressive Allocation
Assuming the 90 days horizon Legg Mason is expected to generate 1.22 times less return on investment than Aggressive Allocation. In addition to that, Legg Mason is 1.04 times more volatile than Aggressive Allocation Fund. It trades about 0.08 of its total potential returns per unit of risk. Aggressive Allocation Fund is currently generating about 0.1 per unit of volatility. If you would invest 961.00 in Aggressive Allocation Fund on September 12, 2024 and sell it today you would earn a total of 401.00 from holding Aggressive Allocation Fund or generate 41.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Legg Mason Bw vs. Aggressive Allocation Fund
Performance |
| Timeline |
| Legg Mason Bw |
| Aggressive Allocation |
Legg Mason and Aggressive Allocation Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Legg Mason and Aggressive Allocation
The main advantage of trading using opposite Legg Mason and Aggressive Allocation positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Legg Mason position performs unexpectedly, Aggressive Allocation 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 Aggressive Allocation will offset losses from the drop in Aggressive Allocation's long position.| Legg Mason vs. Simt Multi Asset Inflation | Legg Mason vs. Loomis Sayles Inflation | Legg Mason vs. Guggenheim Managed Futures | Legg Mason vs. Ab Bond Inflation |
| Aggressive Allocation vs. Jhancock Real Estate | Aggressive Allocation vs. Simt Real Estate | Aggressive Allocation vs. Short Real Estate | Aggressive Allocation vs. Goldman Sachs Real |
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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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