Correlation Between Legg Mason and George Putnam
Can any of the company-specific risk be diversified away by investing in both Legg Mason and George Putnam 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 George Putnam 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 George Putnam Fund, you can compare the effects of market volatilities on Legg Mason and George Putnam 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 George Putnam. Check out your portfolio center. Please also check ongoing floating volatility patterns of Legg Mason and George Putnam.
Diversification Opportunities for Legg Mason and George Putnam
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Legg and GEORGE is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Legg Mason Partners and George Putnam Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on George Putnam 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 George Putnam. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of George Putnam has no effect on the direction of Legg Mason i.e., Legg Mason and George Putnam go up and down completely randomly.
Pair Corralation between Legg Mason and George Putnam
Assuming the 90 days trading horizon Legg Mason Partners is expected to generate 0.99 times more return on investment than George Putnam. However, Legg Mason Partners is 1.01 times less risky than George Putnam. It trades about 0.19 of its potential returns per unit of risk. George Putnam Fund is currently generating about 0.06 per unit of risk. If you would invest 1,507 in Legg Mason Partners on September 2, 2024 and sell it today you would earn a total of 115.00 from holding Legg Mason Partners or generate 7.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Legg Mason Partners vs. George Putnam Fund
Performance |
| Timeline |
| Legg Mason Partners |
| George Putnam |
Legg Mason and George Putnam Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Legg Mason and George Putnam
The main advantage of trading using opposite Legg Mason and George Putnam positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Legg Mason position performs unexpectedly, George Putnam 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 George Putnam will offset losses from the drop in George Putnam's long position.| Legg Mason vs. Vanguard Total Stock | Legg Mason vs. Vanguard 500 Index | Legg Mason vs. Vanguard Total Stock | Legg Mason vs. Vanguard Total Stock |
| George Putnam vs. Putnam Equity Income | George Putnam vs. Putnam Tax Exempt | George Putnam vs. Putnam Floating Rate | George Putnam vs. Putnam High Yield |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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