Correlation Between Leggmason Partners and Large Cap

Can any of the company-specific risk be diversified away by investing in both Leggmason Partners and Large Cap 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 Leggmason Partners and Large Cap into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Leggmason Partners Institutional and Large Cap Value, you can compare the effects of market volatilities on Leggmason Partners and Large Cap 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 Leggmason Partners with a short position of Large Cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Leggmason Partners and Large Cap.

Diversification Opportunities for Leggmason Partners and Large Cap

0.2

Correlation Coefficient

Leggmason Partners  Large Cap

Modest diversification

The 3 months correlation between Leggmason and Large is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Leggmason Partners Institution and Large Cap Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Large Cap Value and Leggmason Partners 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 Leggmason Partners Institutional are associated (or correlated) with Large Cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Large Cap Value has no effect on the direction of Leggmason Partners i.e., Leggmason Partners and Large Cap go up and down completely randomly.

Pair Corralation between Leggmason Partners and Large Cap

If you would invest  2,917  in Large Cap Value on September 4, 2024 and sell it today you would earn a total of  198.00  from holding Large Cap Value or generate 6.79% return on investment over 90 days.

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

Leggmason Partners Institution  vs.  Large Cap Value

Leggmason Partners

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Leggmason Partners Institutional has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Leggmason Partners is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Large Cap Value

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Large Cap Value are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Large Cap may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Leggmason Partners and Large Cap

The main advantage of trading using opposite Leggmason Partners and Large Cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Leggmason Partners position performs unexpectedly, Large Cap 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 Large Cap will offset losses from the drop in Large Cap's long position.

The idea behind Leggmason Partners Institutional and Large Cap Value 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.