Correlation Between Legg Mason and Franklin Lifesmart
Can any of the company-specific risk be diversified away by investing in both Legg Mason and Franklin Lifesmart 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 Lifesmart 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 Franklin Lifesmart 2050, you can compare the effects of market volatilities on Legg Mason and Franklin Lifesmart 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 Lifesmart. Check out your portfolio center. Please also check ongoing floating volatility patterns of Legg Mason and Franklin Lifesmart.
Diversification Opportunities for Legg Mason and Franklin Lifesmart
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Legg and Franklin is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Legg Mason Partners and Franklin Lifesmart 2050 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Lifesmart 2050 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 Franklin Lifesmart. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Lifesmart 2050 has no effect on the direction of Legg Mason i.e., Legg Mason and Franklin Lifesmart go up and down completely randomly.
Pair Corralation between Legg Mason and Franklin Lifesmart
Assuming the 90 days trading horizon Legg Mason Partners is expected to generate 0.74 times more return on investment than Franklin Lifesmart. However, Legg Mason Partners is 1.36 times less risky than Franklin Lifesmart. It trades about 0.1 of its potential returns per unit of risk. Franklin Lifesmart 2050 is currently generating about 0.07 per unit of risk. If you would invest 1,322 in Legg Mason Partners on August 24, 2024 and sell it today you would earn a total of 100.00 from holding Legg Mason Partners or generate 7.56% 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. Franklin Lifesmart 2050
Performance |
| Timeline |
| Legg Mason Partners |
| Franklin Lifesmart 2050 |
Legg Mason and Franklin Lifesmart Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Legg Mason and Franklin Lifesmart
The main advantage of trading using opposite Legg Mason and Franklin Lifesmart positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Legg Mason position performs unexpectedly, Franklin Lifesmart 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 Lifesmart will offset losses from the drop in Franklin Lifesmart'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 |
| Franklin Lifesmart vs. Vanguard Target Retirement | Franklin Lifesmart vs. ABIVAX Socit Anonyme | Franklin Lifesmart vs. SCOR PK | Franklin Lifesmart vs. HUMANA INC |
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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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