Correlation Between Legg Mason and New World
Can any of the company-specific risk be diversified away by investing in both Legg Mason and New World 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 New World into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Legg Mason Partners and New World Fund, you can compare the effects of market volatilities on Legg Mason and New World 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 New World. Check out your portfolio center. Please also check ongoing floating volatility patterns of Legg Mason and New World.
Diversification Opportunities for Legg Mason and New World
0.24 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Legg and New is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Legg Mason Partners and New World Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New World Fund 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 Partners are associated (or correlated) with New World. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New World Fund has no effect on the direction of Legg Mason i.e., Legg Mason and New World go up and down completely randomly.
Pair Corralation between Legg Mason and New World
Assuming the 90 days trading horizon Legg Mason Partners is expected to generate 1.14 times more return on investment than New World. However, Legg Mason is 1.14 times more volatile than New World Fund. It trades about 0.18 of its potential returns per unit of risk. New World Fund is currently generating about -0.19 per unit of risk. If you would invest 2,386 in Legg Mason Partners on August 29, 2024 and sell it today you would earn a total of 74.00 from holding Legg Mason Partners or generate 3.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
Legg Mason Partners vs. New World Fund
Performance |
| Timeline |
| Legg Mason Partners |
| New World Fund |
Legg Mason and New World Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Legg Mason and New World
The main advantage of trading using opposite Legg Mason and New World positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Legg Mason position performs unexpectedly, New World 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 New World will offset losses from the drop in New World's long position.| Legg Mason vs. Vanguard Total Stock | Legg Mason vs. Vanguard 500 Index | Legg Mason vs. Vanguard Total Stock | Legg Mason vs. Vanguard Total Stock |
| New World vs. Artisan Emerging Markets | New World vs. Rbc Emerging Markets | New World vs. Angel Oak Multi Strategy | New World vs. Legg Mason Partners |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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