Correlation Between Legg Mason and Brown Advisory
Can any of the company-specific risk be diversified away by investing in both Legg Mason and Brown Advisory 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 Brown Advisory 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 Brown Advisory Small Cap, you can compare the effects of market volatilities on Legg Mason and Brown Advisory 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 Brown Advisory. Check out your portfolio center. Please also check ongoing floating volatility patterns of Legg Mason and Brown Advisory.
Diversification Opportunities for Legg Mason and Brown Advisory
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Legg and Brown is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Legg Mason Partners and Brown Advisory Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brown Advisory Small 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 Brown Advisory. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brown Advisory Small has no effect on the direction of Legg Mason i.e., Legg Mason and Brown Advisory go up and down completely randomly.
Pair Corralation between Legg Mason and Brown Advisory
Assuming the 90 days trading horizon Legg Mason Partners is expected to generate 0.58 times more return on investment than Brown Advisory. However, Legg Mason Partners is 1.71 times less risky than Brown Advisory. It trades about 0.14 of its potential returns per unit of risk. Brown Advisory Small Cap is currently generating about 0.05 per unit of risk. If you would invest 2,101 in Legg Mason Partners on September 1, 2024 and sell it today you would earn a total of 366.00 from holding Legg Mason Partners or generate 17.42% 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. Brown Advisory Small Cap
Performance |
| Timeline |
| Legg Mason Partners |
| Brown Advisory Small |
Legg Mason and Brown Advisory Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Legg Mason and Brown Advisory
The main advantage of trading using opposite Legg Mason and Brown Advisory positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Legg Mason position performs unexpectedly, Brown Advisory 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 Brown Advisory will offset losses from the drop in Brown Advisory's long position.| Legg Mason vs. Siit Ultra Short | Legg Mason vs. Franklin Federal Limited Term | Legg Mason vs. The Short Term | Legg Mason vs. Maryland Short Term Tax Free |
| Brown Advisory vs. Us Government Plus | Brown Advisory vs. Prudential Government Income | Brown Advisory vs. Short Term Government Fund | Brown Advisory vs. Government Securities Fund |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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