Correlation Between Global Gold and Legg Mason
Can any of the company-specific risk be diversified away by investing in both Global Gold 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 Global Gold and Legg Mason into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Global Gold Fund and Legg Mason Partners, you can compare the effects of market volatilities on Global Gold 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 Global Gold with a short position of Legg Mason. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global Gold and Legg Mason.
Diversification Opportunities for Global Gold and Legg Mason
-0.07 | Correlation Coefficient |
Good diversification
The 3 months correlation between Global and Legg is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Global Gold Fund and Legg Mason Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Legg Mason Partners and Global Gold 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 Global Gold 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 Partners has no effect on the direction of Global Gold i.e., Global Gold and Legg Mason go up and down completely randomly.
Pair Corralation between Global Gold and Legg Mason
Assuming the 90 days horizon Global Gold Fund is expected to generate 1.59 times more return on investment than Legg Mason. However, Global Gold is 1.59 times more volatile than Legg Mason Partners. It trades about 0.43 of its potential returns per unit of risk. Legg Mason Partners is currently generating about 0.21 per unit of risk. If you would invest 1,211 in Global Gold Fund on November 3, 2024 and sell it today you would earn a total of 138.00 from holding Global Gold Fund or generate 11.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Global Gold Fund vs. Legg Mason Partners
Performance |
| Timeline |
| Global Gold Fund |
| Legg Mason Partners |
Global Gold and Legg Mason Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Global Gold and Legg Mason
The main advantage of trading using opposite Global Gold and Legg Mason positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global Gold 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.| Global Gold vs. Vanguard Small Cap Value | Global Gold vs. Omni Small Cap Value | Global Gold vs. Heartland Value Plus | Global Gold vs. Fpa Queens Road |
Check out your portfolio center.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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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