Correlation Between Leggmason Partners and American Funds

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

Diversification Opportunities for Leggmason Partners and American Funds

0.0

Correlation Coefficient

Leggmason Partners  American Funds

Pay attention - limited upside

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

Pair Corralation between Leggmason Partners and American Funds

If you would invest  935.00  in American Funds Preservation on December 4, 2024 and sell it today you would earn a total of  14.00  from holding American Funds Preservation or generate 1.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

Leggmason Partners Institution  vs.  American Funds Preservation

Leggmason Partners

Risk-Adjusted Performance

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.

American Funds Prese

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in American Funds Preservation are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, American Funds 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 American Funds

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

The idea behind Leggmason Partners Institutional and American Funds Preservation 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.