Correlation Between Franklin Mutual and Legg Mason
Can any of the company-specific risk be diversified away by investing in both Franklin Mutual 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 Franklin Mutual and Legg Mason into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Franklin Mutual Shares and Legg Mason Bw, you can compare the effects of market volatilities on Franklin Mutual 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 Franklin Mutual with a short position of Legg Mason. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin Mutual and Legg Mason.
Diversification Opportunities for Franklin Mutual and Legg Mason
0.98 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Franklin and Legg is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Mutual Shares and Legg Mason Bw in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Legg Mason Bw and Franklin Mutual 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 Franklin Mutual Shares 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 Bw has no effect on the direction of Franklin Mutual i.e., Franklin Mutual and Legg Mason go up and down completely randomly.
Pair Corralation between Franklin Mutual and Legg Mason
Assuming the 90 days horizon Franklin Mutual is expected to generate 1.45 times less return on investment than Legg Mason. But when comparing it to its historical volatility, Franklin Mutual Shares is 1.01 times less risky than Legg Mason. It trades about 0.12 of its potential returns per unit of risk. Legg Mason Bw is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 1,780 in Legg Mason Bw on September 2, 2024 and sell it today you would earn a total of 600.00 from holding Legg Mason Bw or generate 33.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Franklin Mutual Shares vs. Legg Mason Bw
Performance |
| Timeline |
| Franklin Mutual Shares |
| Legg Mason Bw |
Franklin Mutual and Legg Mason Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Franklin Mutual and Legg Mason
The main advantage of trading using opposite Franklin Mutual and Legg Mason positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin Mutual 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.| Franklin Mutual vs. Ab Small Cap | Franklin Mutual vs. Fisher Small Cap | Franklin Mutual vs. Vanguard Small Cap Growth | Franklin Mutual vs. Legg Mason Partners |
| Legg Mason vs. Franklin Mutual Beacon | Legg Mason vs. Templeton Developing Markets | Legg Mason vs. Franklin Mutual Global | Legg Mason vs. Franklin Mutual Global |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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