Correlation Between Legg Mason and Vanguard Emerging
Can any of the company-specific risk be diversified away by investing in both Legg Mason and Vanguard Emerging 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 Vanguard Emerging 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 Vanguard Emerging Markets, you can compare the effects of market volatilities on Legg Mason and Vanguard Emerging 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 Vanguard Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of Legg Mason and Vanguard Emerging.
Diversification Opportunities for Legg Mason and Vanguard Emerging
-0.01 | Correlation Coefficient |
Good diversification
The 3 months correlation between Legg and Vanguard is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Legg Mason Bw and Vanguard Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Emerging Markets 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 Vanguard Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Emerging Markets has no effect on the direction of Legg Mason i.e., Legg Mason and Vanguard Emerging go up and down completely randomly.
Pair Corralation between Legg Mason and Vanguard Emerging
Assuming the 90 days horizon Legg Mason Bw is expected to under-perform the Vanguard Emerging. But the mutual fund apears to be less risky and, when comparing its historical volatility, Legg Mason Bw is 1.11 times less risky than Vanguard Emerging. The mutual fund trades about -0.09 of its potential returns per unit of risk. The Vanguard Emerging Markets is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 2,905 in Vanguard Emerging Markets on September 13, 2024 and sell it today you would earn a total of 55.00 from holding Vanguard Emerging Markets or generate 1.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Legg Mason Bw vs. Vanguard Emerging Markets
Performance |
| Timeline |
| Legg Mason Bw |
| Vanguard Emerging Markets |
Legg Mason and Vanguard Emerging Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Legg Mason and Vanguard Emerging
The main advantage of trading using opposite Legg Mason and Vanguard Emerging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Legg Mason position performs unexpectedly, Vanguard Emerging 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 Vanguard Emerging will offset losses from the drop in Vanguard Emerging's long position.| Legg Mason vs. Small Cap Stock | Legg Mason vs. Century Small Cap | Legg Mason vs. Omni Small Cap Value | Legg Mason vs. Versatile Bond Portfolio |
| Vanguard Emerging vs. Dreyfusstandish Global Fixed | Vanguard Emerging vs. Investec Global Franchise | Vanguard Emerging vs. Franklin Mutual Global | Vanguard Emerging vs. Mirova Global Green |
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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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