Correlation Between Growth Strategy and Legg Mason
Can any of the company-specific risk be diversified away by investing in both Growth Strategy and Legg Mason 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 Growth Strategy and Legg Mason into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Growth Strategy Fund and Legg Mason Partners, you can compare the effects of market volatilities on Growth Strategy and Legg Mason 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 Growth Strategy with a short position of Legg Mason. Check out your portfolio center. Please also check ongoing floating volatility patterns of Growth Strategy and Legg Mason.
Diversification Opportunities for Growth Strategy and Legg Mason
0.26 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Growth and Legg is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Growth Strategy Fund and Legg Mason Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Legg Mason Partners and Growth Strategy 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 Growth Strategy Fund are associated (or correlated) with Legg Mason. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Legg Mason Partners has no effect on the direction of Growth Strategy i.e., Growth Strategy and Legg Mason go up and down completely randomly.
Pair Corralation between Growth Strategy and Legg Mason
Assuming the 90 days horizon Growth Strategy Fund is expected to generate 0.17 times more return on investment than Legg Mason. However, Growth Strategy Fund is 5.99 times less risky than Legg Mason. It trades about 0.17 of its potential returns per unit of risk. Legg Mason Partners is currently generating about -0.22 per unit of risk. If you would invest 1,194 in Growth Strategy Fund on September 13, 2024 and sell it today you would earn a total of 16.00 from holding Growth Strategy Fund or generate 1.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Growth Strategy Fund vs. Legg Mason Partners
Performance |
| Timeline |
| Growth Strategy |
| Legg Mason Partners |
Growth Strategy and Legg Mason Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Growth Strategy and Legg Mason
The main advantage of trading using opposite Growth Strategy and Legg Mason positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Growth Strategy position performs unexpectedly, Legg Mason 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 Legg Mason will offset losses from the drop in Legg Mason's long position.| Growth Strategy vs. Transamerica Emerging Markets | Growth Strategy vs. Ep Emerging Markets | Growth Strategy vs. Extended Market Index | Growth Strategy vs. Pnc Emerging Markets |
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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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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