Correlation Between Royce Opportunity and Legg Mason
Can any of the company-specific risk be diversified away by investing in both Royce Opportunity 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 Royce Opportunity and Legg Mason into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Royce Opportunity Fund and Legg Mason Partners, you can compare the effects of market volatilities on Royce Opportunity 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 Royce Opportunity with a short position of Legg Mason. Check out your portfolio center. Please also check ongoing floating volatility patterns of Royce Opportunity and Legg Mason.
Diversification Opportunities for Royce Opportunity and Legg Mason
0.28 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Royce and Legg is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Royce Opportunity 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 Royce Opportunity 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 Royce Opportunity 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 Royce Opportunity i.e., Royce Opportunity and Legg Mason go up and down completely randomly.
Pair Corralation between Royce Opportunity and Legg Mason
Assuming the 90 days horizon Royce Opportunity Fund is expected to generate 0.94 times more return on investment than Legg Mason. However, Royce Opportunity Fund is 1.06 times less risky than Legg Mason. It trades about -0.07 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 1,682 in Royce Opportunity Fund on September 14, 2024 and sell it today you would lose (60.00) from holding Royce Opportunity Fund or give up 3.57% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Royce Opportunity Fund vs. Legg Mason Partners
Performance |
| Timeline |
| Royce Opportunity |
| Legg Mason Partners |
Royce Opportunity and Legg Mason Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Royce Opportunity and Legg Mason
The main advantage of trading using opposite Royce Opportunity and Legg Mason positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Royce Opportunity 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.| Royce Opportunity vs. Royce Micro Cap Fund | Royce Opportunity vs. Royce Total Return | Royce Opportunity vs. Royce Special Equity | Royce Opportunity vs. Longleaf Partners Fund |
| Legg Mason vs. Vanguard Total Stock | Legg Mason vs. Vanguard 500 Index | Legg Mason vs. Vanguard Total Stock | Legg Mason vs. Vanguard Total Stock |
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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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