Correlation Between Chase Growth and Legg Mason

Can any of the company-specific risk be diversified away by investing in both Chase Growth 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 Chase Growth and Legg Mason into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Chase Growth Fund and Legg Mason Partners, you can compare the effects of market volatilities on Chase Growth 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 Chase Growth with a short position of Legg Mason. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chase Growth and Legg Mason.

Diversification Opportunities for Chase Growth and Legg Mason

0.95

Correlation Coefficient

Chase Growth  Legg Mason

Almost no diversification

The 3 months correlation between Chase and Legg is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Chase Growth 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 Chase Growth 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 Chase Growth 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 Chase Growth i.e., Chase Growth and Legg Mason go up and down completely randomly.

Pair Corralation between Chase Growth and Legg Mason

Assuming the 90 days horizon Chase Growth is expected to generate 1.1 times less return on investment than Legg Mason. But when comparing it to its historical volatility, Chase Growth Fund is 1.36 times less risky than Legg Mason. It trades about 0.25 of its potential returns per unit of risk. Legg Mason Partners is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  2,487  in Legg Mason Partners on August 31, 2024 and sell it today you would earn a total of  396.00  from holding Legg Mason Partners or generate 15.92% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.44%
Values	Daily Returns

Chase Growth Fund  vs.  Legg Mason Partners

Chase Growth

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Chase Growth Fund are ranked lower than 20 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Chase Growth showed solid returns over the last few months and may actually be approaching a breakup point.

Legg Mason Partners

Risk-Adjusted Performance

16 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Legg Mason Partners are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak primary indicators, Legg Mason showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Chase Growth and Legg Mason

The main advantage of trading using opposite Chase Growth and Legg Mason positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chase Growth 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.

The idea behind Chase Growth Fund and Legg Mason Partners pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.