Correlation Between Legg Mason and Lord Abbett
Can any of the company-specific risk be diversified away by investing in both Legg Mason and Lord Abbett 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 Lord Abbett 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 Lord Abbett Focused, you can compare the effects of market volatilities on Legg Mason and Lord Abbett 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 Lord Abbett. Check out your portfolio center. Please also check ongoing floating volatility patterns of Legg Mason and Lord Abbett.
Diversification Opportunities for Legg Mason and Lord Abbett
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Legg and Lord is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Legg Mason Bw and Lord Abbett Focused in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lord Abbett Focused 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 Lord Abbett. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lord Abbett Focused has no effect on the direction of Legg Mason i.e., Legg Mason and Lord Abbett go up and down completely randomly.
Pair Corralation between Legg Mason and Lord Abbett
Assuming the 90 days horizon Legg Mason Bw is expected to generate 0.51 times more return on investment than Lord Abbett. However, Legg Mason Bw is 1.96 times less risky than Lord Abbett. It trades about 0.17 of its potential returns per unit of risk. Lord Abbett Focused is currently generating about 0.05 per unit of risk. If you would invest 2,196 in Legg Mason Bw on September 2, 2024 and sell it today you would earn a total of 192.00 from holding Legg Mason Bw or generate 8.74% 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. Lord Abbett Focused
Performance |
| Timeline |
| Legg Mason Bw |
| Lord Abbett Focused |
Legg Mason and Lord Abbett Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Legg Mason and Lord Abbett
The main advantage of trading using opposite Legg Mason and Lord Abbett positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Legg Mason position performs unexpectedly, Lord Abbett 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 Lord Abbett will offset losses from the drop in Lord Abbett'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 |
| Lord Abbett vs. Lord Abbett Trust | Lord Abbett vs. Lord Abbett Trust | Lord Abbett vs. Lord Abbett Focused | Lord Abbett vs. Floating Rate 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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