Correlation Between Leggmason Partners and Amcap Fund

Can any of the company-specific risk be diversified away by investing in both Leggmason Partners and Amcap Fund 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 Amcap Fund 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 Amcap Fund Class, you can compare the effects of market volatilities on Leggmason Partners and Amcap Fund 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 Amcap Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Leggmason Partners and Amcap Fund.

Diversification Opportunities for Leggmason Partners and Amcap Fund

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Correlation Coefficient

Leggmason Partners  Amcap Fund

Pay attention - limited upside

The 3 months correlation between Leggmason and Amcap is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Leggmason Partners Institution and Amcap Fund Class in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amcap Fund Class 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 Amcap Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amcap Fund Class has no effect on the direction of Leggmason Partners i.e., Leggmason Partners and Amcap Fund go up and down completely randomly.

Pair Corralation between Leggmason Partners and Amcap Fund

Assuming the 90 days horizon Leggmason Partners is expected to generate 7.02 times less return on investment than Amcap Fund. But when comparing it to its historical volatility, Leggmason Partners Institutional is 1.6 times less risky than Amcap Fund. It trades about 0.02 of its potential returns per unit of risk. Amcap Fund Class is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  2,984  in Amcap Fund Class on September 26, 2024 and sell it today you would earn a total of  1,444  from holding Amcap Fund Class or generate 48.39% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	99.2%
Values	Daily Returns

Leggmason Partners Institution  vs.  Amcap Fund Class

Leggmason Partners

Risk-Adjusted Performance

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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.

Amcap Fund Class

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Leggmason Partners and Amcap Fund

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

The idea behind Leggmason Partners Institutional and Amcap Fund Class 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 Managers module to screen money managers from public funds and ETFs managed around the world.