Correlation Between Legg Mason and Jhancock Global

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

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

Diversification Opportunities for Legg Mason and Jhancock Global

0.24

Correlation Coefficient

Legg Mason  Jhancock Global

Modest diversification

The 3 months correlation between Legg and Jhancock is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Legg Mason Global and Jhancock Global Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jhancock Global Equity 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 Global are associated (or correlated) with Jhancock Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jhancock Global Equity has no effect on the direction of Legg Mason i.e., Legg Mason and Jhancock Global go up and down completely randomly.

Pair Corralation between Legg Mason and Jhancock Global

Assuming the 90 days horizon Legg Mason Global is expected to generate 0.47 times more return on investment than Jhancock Global. However, Legg Mason Global is 2.13 times less risky than Jhancock Global. It trades about 0.02 of its potential returns per unit of risk. Jhancock Global Equity is currently generating about -0.01 per unit of risk. If you would invest  957.00  in Legg Mason Global on September 13, 2024 and sell it today you would earn a total of  2.00  from holding Legg Mason Global or generate 0.21% return on investment over 90 days.

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

Legg Mason Global  vs.  Jhancock Global Equity

Legg Mason Global

Risk-Adjusted Performance

0 of 100

Very Weak

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

Jhancock Global Equity

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Jhancock Global Equity are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Jhancock Global is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Legg Mason and Jhancock Global

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

The idea behind Legg Mason Global and Jhancock Global Equity 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.