Correlation Between Legg Mason and Capital Appreciation
Can any of the company-specific risk be diversified away by investing in both Legg Mason and Capital Appreciation 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 Capital Appreciation into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Legg Mason Partners and Capital Appreciation Fund, you can compare the effects of market volatilities on Legg Mason and Capital Appreciation 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 Capital Appreciation. Check out your portfolio center. Please also check ongoing floating volatility patterns of Legg Mason and Capital Appreciation.
Diversification Opportunities for Legg Mason and Capital Appreciation
0.98 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Legg and Capital is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Legg Mason Partners and Capital Appreciation Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital Appreciation 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 Partners are associated (or correlated) with Capital Appreciation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital Appreciation has no effect on the direction of Legg Mason i.e., Legg Mason and Capital Appreciation go up and down completely randomly.
Pair Corralation between Legg Mason and Capital Appreciation
Assuming the 90 days trading horizon Legg Mason is expected to generate 1.83 times less return on investment than Capital Appreciation. But when comparing it to its historical volatility, Legg Mason Partners is 1.67 times less risky than Capital Appreciation. It trades about 0.1 of its potential returns per unit of risk. Capital Appreciation Fund is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 1,005 in Capital Appreciation Fund on September 3, 2024 and sell it today you would earn a total of 800.00 from holding Capital Appreciation Fund or generate 79.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Legg Mason Partners vs. Capital Appreciation Fund
Performance |
| Timeline |
| Legg Mason Partners |
| Capital Appreciation |
Legg Mason and Capital Appreciation Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Legg Mason and Capital Appreciation
The main advantage of trading using opposite Legg Mason and Capital Appreciation positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Legg Mason position performs unexpectedly, Capital Appreciation 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 Capital Appreciation will offset losses from the drop in Capital Appreciation's long position.| Legg Mason vs. Avantis Large Cap | Legg Mason vs. Qs Large Cap | Legg Mason vs. Americafirst Large Cap | Legg Mason vs. Dana Large 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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