Correlation Between Jhancock Disciplined and Legg Mason

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

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

Diversification Opportunities for Jhancock Disciplined and Legg Mason

0.63

Correlation Coefficient

Jhancock Disciplined  Legg Mason

Poor diversification

The 3 months correlation between JHancock and Legg is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Jhancock Disciplined Value 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 Jhancock Disciplined 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 Jhancock Disciplined Value 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 Jhancock Disciplined i.e., Jhancock Disciplined and Legg Mason go up and down completely randomly.

Pair Corralation between Jhancock Disciplined and Legg Mason

Assuming the 90 days horizon Jhancock Disciplined Value is expected to under-perform the Legg Mason. In addition to that, Jhancock Disciplined is 1.1 times more volatile than Legg Mason Bw. It trades about -0.17 of its total potential returns per unit of risk. Legg Mason Bw is currently generating about -0.14 per unit of volatility. If you would invest  2,345  in Legg Mason Bw on November 29, 2024 and sell it today you would lose (251.00) from holding Legg Mason Bw or give up 10.7% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Jhancock Disciplined Value  vs.  Legg Mason Bw

Jhancock Disciplined

Risk-Adjusted Performance

Very Weak

Over the last 90 days Jhancock Disciplined Value has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's basic indicators remain fairly strong which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Legg Mason Bw

Risk-Adjusted Performance

Very Weak

Over the last 90 days Legg Mason Bw has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Jhancock Disciplined and Legg Mason

The main advantage of trading using opposite Jhancock Disciplined and Legg Mason positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Jhancock Disciplined 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 Jhancock Disciplined Value and Legg Mason Bw 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.