Correlation Between Legg Mason and Franklin Mutual
Can any of the company-specific risk be diversified away by investing in both Legg Mason and Franklin Mutual 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 Franklin Mutual 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 Franklin Mutual Beacon, you can compare the effects of market volatilities on Legg Mason and Franklin Mutual 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 Franklin Mutual. Check out your portfolio center. Please also check ongoing floating volatility patterns of Legg Mason and Franklin Mutual.
Diversification Opportunities for Legg Mason and Franklin Mutual
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Legg and Franklin is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Legg Mason Bw and Franklin Mutual Beacon in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Mutual Beacon 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 Franklin Mutual. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Mutual Beacon has no effect on the direction of Legg Mason i.e., Legg Mason and Franklin Mutual go up and down completely randomly.
Pair Corralation between Legg Mason and Franklin Mutual
Assuming the 90 days horizon Legg Mason Bw is expected to generate 1.13 times more return on investment than Franklin Mutual. However, Legg Mason is 1.13 times more volatile than Franklin Mutual Beacon. It trades about 0.16 of its potential returns per unit of risk. Franklin Mutual Beacon is currently generating about 0.09 per unit of risk. If you would invest 2,036 in Legg Mason Bw on September 2, 2024 and sell it today you would earn a total of 344.00 from holding Legg Mason Bw or generate 16.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Legg Mason Bw vs. Franklin Mutual Beacon
Performance |
| Timeline |
| Legg Mason Bw |
| Franklin Mutual Beacon |
Legg Mason and Franklin Mutual Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Legg Mason and Franklin Mutual
The main advantage of trading using opposite Legg Mason and Franklin Mutual positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Legg Mason position performs unexpectedly, Franklin Mutual 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 Franklin Mutual will offset losses from the drop in Franklin Mutual's long position.| Legg Mason vs. Franklin Mutual Beacon | Legg Mason vs. Templeton Developing Markets | Legg Mason vs. Franklin Mutual Global | Legg Mason vs. Franklin Mutual Global |
| Franklin Mutual vs. Templeton Developing Markets | Franklin Mutual vs. Franklin Mutual Global | Franklin Mutual vs. Franklin Mutual Global | Franklin Mutual vs. Templeton Foreign 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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