Correlation Between Legg Mason and Clearbridge Aggressive

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

By analyzing existing cross correlation between Legg Mason Bw and Clearbridge Aggressive Growth, you can compare the effects of market volatilities on Legg Mason and Clearbridge Aggressive 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 Clearbridge Aggressive. Check out your portfolio center. Please also check ongoing floating volatility patterns of Legg Mason and Clearbridge Aggressive.

Diversification Opportunities for Legg Mason and Clearbridge Aggressive

0.88

Correlation Coefficient

Legg Mason  Clearbridge Aggressive

Very poor diversification

The 3 months correlation between Legg and Clearbridge is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Legg Mason Bw and Clearbridge Aggressive Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Clearbridge Aggressive 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 Bw are associated (or correlated) with Clearbridge Aggressive. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Clearbridge Aggressive has no effect on the direction of Legg Mason i.e., Legg Mason and Clearbridge Aggressive go up and down completely randomly.

Pair Corralation between Legg Mason and Clearbridge Aggressive

Assuming the 90 days horizon Legg Mason Bw is expected to generate 0.84 times more return on investment than Clearbridge Aggressive. However, Legg Mason Bw is 1.19 times less risky than Clearbridge Aggressive. It trades about 0.25 of its potential returns per unit of risk. Clearbridge Aggressive Growth is currently generating about 0.07 per unit of risk. If you would invest  1,990  in Legg Mason Bw on October 22, 2024 and sell it today you would earn a total of  68.00  from holding Legg Mason Bw or generate 3.42% return on investment over 90 days.

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

Legg Mason Bw  vs.  Clearbridge Aggressive Growth

Legg Mason Bw

Risk-Adjusted Performance

0 of 100

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 fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Clearbridge Aggressive

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Clearbridge Aggressive Growth 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 fundamental indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Legg Mason and Clearbridge Aggressive

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

The idea behind Legg Mason Bw and Clearbridge Aggressive Growth 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.