Correlation Between Legg Mason and Allianzgi Global

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

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

Diversification Opportunities for Legg Mason and Allianzgi Global

0.61

Correlation Coefficient

Legg Mason  Allianzgi Global

Poor diversification

The 3 months correlation between Legg and Allianzgi is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Legg Mason Partners and Allianzgi Global Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allianzgi Global Small 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 Partners are associated (or correlated) with Allianzgi Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Allianzgi Global Small has no effect on the direction of Legg Mason i.e., Legg Mason and Allianzgi Global go up and down completely randomly.

Pair Corralation between Legg Mason and Allianzgi Global

Assuming the 90 days trading horizon Legg Mason Partners is expected to under-perform the Allianzgi Global. But the fund apears to be less risky and, when comparing its historical volatility, Legg Mason Partners is 1.48 times less risky than Allianzgi Global. The fund trades about -0.02 of its potential returns per unit of risk. The Allianzgi Global Small Cap is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  3,241  in Allianzgi Global Small Cap on December 30, 2024 and sell it today you would earn a total of  62.00  from holding Allianzgi Global Small Cap or generate 1.91% return on investment over 90 days.

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

Legg Mason Partners  vs.  Allianzgi Global Small Cap

Legg Mason Partners

Risk-Adjusted Performance

Very Weak

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

Allianzgi Global Small

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Allianzgi Global Small Cap are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Allianzgi 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 Allianzgi Global

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

The idea behind Legg Mason Partners and Allianzgi Global Small Cap 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.