Correlation Between Legg Mason and Nationwide International
Can any of the company-specific risk be diversified away by investing in both Legg Mason and Nationwide International 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 Nationwide International 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 Nationwide International Index, you can compare the effects of market volatilities on Legg Mason and Nationwide International 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 Nationwide International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Legg Mason and Nationwide International.
Diversification Opportunities for Legg Mason and Nationwide International
-0.66 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Legg and Nationwide is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Legg Mason Bw and Nationwide International Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nationwide International 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 Nationwide International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nationwide International has no effect on the direction of Legg Mason i.e., Legg Mason and Nationwide International go up and down completely randomly.
Pair Corralation between Legg Mason and Nationwide International
Assuming the 90 days horizon Legg Mason Bw is expected to generate 0.97 times more return on investment than Nationwide International. However, Legg Mason Bw is 1.03 times less risky than Nationwide International. It trades about 0.08 of its potential returns per unit of risk. Nationwide International Index is currently generating about 0.06 per unit of risk. If you would invest 1,782 in Legg Mason Bw on September 3, 2024 and sell it today you would earn a total of 606.00 from holding Legg Mason Bw or generate 34.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Legg Mason Bw vs. Nationwide International Index
Performance |
| Timeline |
| Legg Mason Bw |
| Nationwide International |
Legg Mason and Nationwide International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Legg Mason and Nationwide International
The main advantage of trading using opposite Legg Mason and Nationwide International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Legg Mason position performs unexpectedly, Nationwide International 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 Nationwide International will offset losses from the drop in Nationwide International's long position.| Legg Mason vs. Mutual Of America | Legg Mason vs. Victory Rs Partners | Legg Mason vs. Royce Opportunity Fund | Legg Mason vs. Hennessy Nerstone Mid |
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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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