Correlation Between Legg Mason and Capital World
Can any of the company-specific risk be diversified away by investing in both Legg Mason and Capital World 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 Capital World 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 Capital World Growth, you can compare the effects of market volatilities on Legg Mason and Capital World 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 Capital World. Check out your portfolio center. Please also check ongoing floating volatility patterns of Legg Mason and Capital World.
Diversification Opportunities for Legg Mason and Capital World
0.59 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Legg and Capital is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Legg Mason Partners and Capital World Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital World Growth 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 Capital World. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital World Growth has no effect on the direction of Legg Mason i.e., Legg Mason and Capital World go up and down completely randomly.
Pair Corralation between Legg Mason and Capital World
Assuming the 90 days trading horizon Legg Mason is expected to generate 1.54 times less return on investment than Capital World. In addition to that, Legg Mason is 1.65 times more volatile than Capital World Growth. It trades about 0.04 of its total potential returns per unit of risk. Capital World Growth is currently generating about 0.09 per unit of volatility. If you would invest 5,024 in Capital World Growth on September 2, 2024 and sell it today you would earn a total of 1,876 from holding Capital World Growth or generate 37.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Legg Mason Partners vs. Capital World Growth
Performance |
| Timeline |
| Legg Mason Partners |
| Capital World Growth |
Legg Mason and Capital World Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Legg Mason and Capital World
The main advantage of trading using opposite Legg Mason and Capital World positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Legg Mason position performs unexpectedly, Capital World 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 Capital World will offset losses from the drop in Capital World'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 |
| Capital World vs. Qs Growth Fund | Capital World vs. Kinetics Small Cap | Capital World vs. Eip Growth And | Capital World vs. Tfa Alphagen Growth |
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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