Correlation Between Legg Mason and American Beacon
Can any of the company-specific risk be diversified away by investing in both Legg Mason and American Beacon 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 American Beacon into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Legg Mason Global and American Beacon Twentyfour, you can compare the effects of market volatilities on Legg Mason and American Beacon 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 American Beacon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Legg Mason and American Beacon.
Diversification Opportunities for Legg Mason and American Beacon
-0.35 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Legg and American is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Legg Mason Global and American Beacon Twentyfour in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Beacon Twen 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 Global are associated (or correlated) with American Beacon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Beacon Twen has no effect on the direction of Legg Mason i.e., Legg Mason and American Beacon go up and down completely randomly.
Pair Corralation between Legg Mason and American Beacon
Assuming the 90 days horizon Legg Mason Global is expected to generate 1.79 times more return on investment than American Beacon. However, Legg Mason is 1.79 times more volatile than American Beacon Twentyfour. It trades about 0.09 of its potential returns per unit of risk. American Beacon Twentyfour is currently generating about 0.11 per unit of risk. If you would invest 870.00 in Legg Mason Global on September 12, 2024 and sell it today you would earn a total of 90.00 from holding Legg Mason Global or generate 10.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Legg Mason Global vs. American Beacon Twentyfour
Performance |
| Timeline |
| Legg Mason Global |
| American Beacon Twen |
Legg Mason and American Beacon Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Legg Mason and American Beacon
The main advantage of trading using opposite Legg Mason and American Beacon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Legg Mason position performs unexpectedly, American Beacon 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 American Beacon will offset losses from the drop in American Beacon's long position.| Legg Mason vs. Ab Global Real | Legg Mason vs. Kinetics Global Fund | Legg Mason vs. Mirova Global Green | Legg Mason vs. Scharf Global Opportunity |
| American Beacon vs. Legg Mason Global | American Beacon vs. Ab Global Risk | American Beacon vs. Franklin Mutual Global | American Beacon vs. Artisan Global Unconstrained |
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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