Correlation Between Legg Mason and Northern Global
Can any of the company-specific risk be diversified away by investing in both Legg Mason and Northern 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 Northern Global into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Legg Mason Bw and Northern Global Tactical, you can compare the effects of market volatilities on Legg Mason and Northern 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 Northern Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of Legg Mason and Northern Global.
Diversification Opportunities for Legg Mason and Northern Global
0.53 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Legg and Northern is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Legg Mason Bw and Northern Global Tactical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern Global Tactical 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 Bw are associated (or correlated) with Northern Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northern Global Tactical has no effect on the direction of Legg Mason i.e., Legg Mason and Northern Global go up and down completely randomly.
Pair Corralation between Legg Mason and Northern Global
Assuming the 90 days horizon Legg Mason Bw is expected to generate 2.29 times more return on investment than Northern Global. However, Legg Mason is 2.29 times more volatile than Northern Global Tactical. It trades about 0.34 of its potential returns per unit of risk. Northern Global Tactical is currently generating about 0.16 per unit of risk. If you would invest 2,216 in Legg Mason Bw on September 3, 2024 and sell it today you would earn a total of 158.00 from holding Legg Mason Bw or generate 7.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Legg Mason Bw vs. Northern Global Tactical
Performance |
| Timeline |
| Legg Mason Bw |
| Northern Global Tactical |
Legg Mason and Northern Global Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Legg Mason and Northern Global
The main advantage of trading using opposite Legg Mason and Northern Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Legg Mason position performs unexpectedly, Northern 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 Northern Global will offset losses from the drop in Northern Global's long position.| Legg Mason vs. Dodge Cox Stock | Legg Mason vs. American Funds American | Legg Mason vs. American Funds American | Legg Mason vs. American Mutual Fund |
| Northern Global vs. Legg Mason Bw | Northern Global vs. Massmutual Premier Diversified | Northern Global vs. Lord Abbett Diversified | Northern Global vs. Tiaa Cref Smallmid Cap Equity |
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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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