Correlation Between Legg Mason and Value Fund
Can any of the company-specific risk be diversified away by investing in both Legg Mason and Value Fund 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 Value Fund 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 Value Fund R, you can compare the effects of market volatilities on Legg Mason and Value Fund 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 Value Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Legg Mason and Value Fund.
Diversification Opportunities for Legg Mason and Value Fund
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Legg and Value is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Legg Mason Partners and Value Fund R in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Value Fund R 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 Value Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Value Fund R has no effect on the direction of Legg Mason i.e., Legg Mason and Value Fund go up and down completely randomly.
Pair Corralation between Legg Mason and Value Fund
Assuming the 90 days trading horizon Legg Mason Partners is expected to generate 1.76 times more return on investment than Value Fund. However, Legg Mason is 1.76 times more volatile than Value Fund R. It trades about 0.07 of its potential returns per unit of risk. Value Fund R is currently generating about 0.08 per unit of risk. If you would invest 2,347 in Legg Mason Partners on September 2, 2024 and sell it today you would earn a total of 536.00 from holding Legg Mason Partners or generate 22.84% 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. Value Fund R
Performance |
| Timeline |
| Legg Mason Partners |
| Value Fund R |
Legg Mason and Value Fund Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Legg Mason and Value Fund
The main advantage of trading using opposite Legg Mason and Value Fund positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Legg Mason position performs unexpectedly, Value Fund 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 Value Fund will offset losses from the drop in Value Fund's long position.| Legg Mason vs. Shelton Emerging Markets | Legg Mason vs. Locorr Market Trend | Legg Mason vs. Rbc Emerging Markets | Legg Mason vs. Western Asset Diversified |
| Value Fund vs. Legg Mason Bw | Value Fund vs. Tax Managed Large Cap | Value Fund vs. Alternative Asset Allocation | Value Fund vs. Strategic Allocation Aggressive |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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