Correlation Between Moderate Strategy and Legg Mason

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

By analyzing existing cross correlation between Moderate Strategy Fund and Legg Mason Global, you can compare the effects of market volatilities on Moderate Strategy and Legg Mason 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 Moderate Strategy with a short position of Legg Mason. Check out your portfolio center. Please also check ongoing floating volatility patterns of Moderate Strategy and Legg Mason.

Diversification Opportunities for Moderate Strategy and Legg Mason

0.5

Correlation Coefficient

Moderate Strategy  Legg Mason

Very weak diversification

The 3 months correlation between Moderate and Legg is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Moderate Strategy Fund and Legg Mason Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Legg Mason Global and Moderate Strategy 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 Moderate Strategy Fund are associated (or correlated) with Legg Mason. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Legg Mason Global has no effect on the direction of Moderate Strategy i.e., Moderate Strategy and Legg Mason go up and down completely randomly.

Pair Corralation between Moderate Strategy and Legg Mason

Assuming the 90 days horizon Moderate Strategy Fund is expected to generate 1.37 times more return on investment than Legg Mason. However, Moderate Strategy is 1.37 times more volatile than Legg Mason Global. It trades about 0.26 of its potential returns per unit of risk. Legg Mason Global is currently generating about 0.15 per unit of risk. If you would invest  957.00  in Moderate Strategy Fund on May 25, 2025 and sell it today you would earn a total of  49.00  from holding Moderate Strategy Fund or generate 5.12% return on investment over 90 days.

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

Moderate Strategy Fund  vs.  Legg Mason Global

Moderate Strategy

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Moderate Strategy Fund are ranked lower than 20 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Moderate Strategy is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Legg Mason Global

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Legg Mason Global are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. 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.

Pair Trading with Moderate Strategy and Legg Mason

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

The idea behind Moderate Strategy Fund and Legg Mason Global 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.