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
0.33 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Global and Legg is 0.33. 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 under-perform the Legg Mason. In addition to that, Global Gold is 10.76 times more volatile than Legg Mason Partners. It trades about -0.14 of its total potential returns per unit of risk. Legg Mason Partners is currently generating about 0.32 per unit of volatility. If you would invest 665.00 in Legg Mason Partners on September 3, 2024 and sell it today you would earn a total of 8.00 from holding Legg Mason Partners or generate 1.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| 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. Baird Smallmid Cap | Global Gold vs. The Hartford Small | Global Gold vs. Touchstone Small Cap | Global Gold vs. Small Cap Value |
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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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