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 Partners and American Beacon Ark, 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
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Legg and American is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Legg Mason Partners and American Beacon Ark in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Beacon Ark 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 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 Ark 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 trading horizon Legg Mason is expected to generate 2.24 times less return on investment than American Beacon. But when comparing it to its historical volatility, Legg Mason Partners is 4.8 times less risky than American Beacon. It trades about 0.1 of its potential returns per unit of risk. American Beacon Ark is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 1,006 in American Beacon Ark on September 3, 2024 and sell it today you would earn a total of 479.00 from holding American Beacon Ark or generate 47.61% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Legg Mason Partners vs. American Beacon Ark
Performance |
| Timeline |
| Legg Mason Partners |
| American Beacon Ark |
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. Blackrock Government Bond | Legg Mason vs. Inverse Government Long | Legg Mason vs. Dws Government Money | Legg Mason vs. Us Government Securities |
| American Beacon vs. T Rowe Price | American Beacon vs. T Rowe Price | American Beacon vs. Hood River New | American Beacon vs. Legg Mason Partners |
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 Commodity Directory module to find actively traded commodities issued by global exchanges.
Other Complementary Tools
| Price Transformation Use Price Transformation models to analyze the depth of different equity instruments across global markets | |
| Sign In To Macroaxis Sign in to explore Macroaxis' wealth optimization platform and fintech modules | |
| Content Syndication Quickly integrate customizable finance content to your own investment portal | |
| Portfolio Diagnostics Use generated alerts and portfolio events aggregator to diagnose current holdings | |
| Global Correlations Find global opportunities by holding instruments from different markets |