Correlation Between Legg Mason and Homestead Funds
Can any of the company-specific risk be diversified away by investing in both Legg Mason and Homestead Funds 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 Homestead Funds 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 Homestead Funds , you can compare the effects of market volatilities on Legg Mason and Homestead Funds 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 Homestead Funds. Check out your portfolio center. Please also check ongoing floating volatility patterns of Legg Mason and Homestead Funds.
Diversification Opportunities for Legg Mason and Homestead Funds
0.0 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Legg and Homestead is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Legg Mason Partners and Homestead Funds in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Homestead Funds 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 Homestead Funds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Homestead Funds has no effect on the direction of Legg Mason i.e., Legg Mason and Homestead Funds go up and down completely randomly.
Pair Corralation between Legg Mason and Homestead Funds
Assuming the 90 days horizon Legg Mason Partners is expected to generate 2.72 times more return on investment than Homestead Funds. However, Legg Mason is 2.72 times more volatile than Homestead Funds . It trades about 0.02 of its potential returns per unit of risk. Homestead Funds is currently generating about 0.04 per unit of risk. If you would invest 92.00 in Legg Mason Partners on September 12, 2024 and sell it today you would earn a total of 8.00 from holding Legg Mason Partners or generate 8.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 85.0% |
| Values | Daily Returns |
Legg Mason Partners vs. Homestead Funds
Performance |
| Timeline |
| Legg Mason Partners |
| Homestead Funds |
Legg Mason and Homestead Funds Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Legg Mason and Homestead Funds
The main advantage of trading using opposite Legg Mason and Homestead Funds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Legg Mason position performs unexpectedly, Homestead Funds 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 Homestead Funds will offset losses from the drop in Homestead Funds' long position.| Legg Mason vs. Dreyfus Natural Resources | Legg Mason vs. Goehring Rozencwajg Resources | Legg Mason vs. Thrivent Natural Resources | Legg Mason vs. Tortoise Energy Independence |
| Homestead Funds vs. Vanguard Total Stock | Homestead Funds vs. Vanguard 500 Index | Homestead Funds vs. Vanguard Total Stock | Homestead Funds 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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