Correlation Between Legg Mason and Small-cap Value
Can any of the company-specific risk be diversified away by investing in both Legg Mason and Small-cap Value 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 Small-cap Value 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 Small Cap Value Fund, you can compare the effects of market volatilities on Legg Mason and Small-cap Value 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 Small-cap Value. Check out your portfolio center. Please also check ongoing floating volatility patterns of Legg Mason and Small-cap Value.
Diversification Opportunities for Legg Mason and Small-cap Value
0.01 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Legg and Small-cap is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Legg Mason Partners and Small Cap Value Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Small Cap Value 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 Small-cap Value. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Small Cap Value has no effect on the direction of Legg Mason i.e., Legg Mason and Small-cap Value go up and down completely randomly.
Pair Corralation between Legg Mason and Small-cap Value
If you would invest 4,001 in Small Cap Value Fund on August 25, 2024 and sell it today you would earn a total of 363.00 from holding Small Cap Value Fund or generate 9.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Legg Mason Partners vs. Small Cap Value Fund
Performance |
| Timeline |
| Legg Mason Partners |
| Small Cap Value |
Legg Mason and Small-cap Value Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Legg Mason and Small-cap Value
The main advantage of trading using opposite Legg Mason and Small-cap Value positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Legg Mason position performs unexpectedly, Small-cap Value 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 Small-cap Value will offset losses from the drop in Small-cap Value's long position.| Legg Mason vs. Vanguard Total Stock | Legg Mason vs. Vanguard 500 Index | Legg Mason vs. Vanguard Total Stock | Legg Mason vs. Vanguard Total Stock |
| Small-cap Value vs. Morgan Stanley Government | Small-cap Value vs. Cref Money Market | Small-cap Value vs. Transamerica Funds | Small-cap Value vs. Legg Mason Partners |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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