Correlation Between Vanguard Global and Legg Mason
Can any of the company-specific risk be diversified away by investing in both Vanguard Global 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 Vanguard Global and Legg Mason into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Global Credit and Legg Mason Global, you can compare the effects of market volatilities on Vanguard Global 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 Vanguard Global with a short position of Legg Mason. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Global and Legg Mason.
Diversification Opportunities for Vanguard Global and Legg Mason
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Vanguard and Legg is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Global Credit and Legg Mason Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Legg Mason Global and Vanguard Global 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 Vanguard Global Credit 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 Global has no effect on the direction of Vanguard Global i.e., Vanguard Global and Legg Mason go up and down completely randomly.
Pair Corralation between Vanguard Global and Legg Mason
Assuming the 90 days horizon Vanguard Global Credit is expected to generate 1.06 times more return on investment than Legg Mason. However, Vanguard Global is 1.06 times more volatile than Legg Mason Global. It trades about 0.09 of its potential returns per unit of risk. Legg Mason Global is currently generating about 0.07 per unit of risk. If you would invest 1,802 in Vanguard Global Credit on November 3, 2024 and sell it today you would earn a total of 101.00 from holding Vanguard Global Credit or generate 5.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Global Credit vs. Legg Mason Global
Performance |
| Timeline |
| Vanguard Global Credit |
| Legg Mason Global |
Vanguard Global and Legg Mason Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Global and Legg Mason
The main advantage of trading using opposite Vanguard Global and Legg Mason positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Global 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.| Vanguard Global vs. Smallcap World Fund | Vanguard Global vs. Gmo Global Equity | Vanguard Global vs. Enhanced Fixed Income | Vanguard Global vs. Old Westbury Fixed |
| Legg Mason vs. Lord Abbett Diversified | Legg Mason vs. Lord Abbett Diversified | Legg Mason vs. Fulcrum Diversified Absolute | Legg Mason vs. Wells Fargo Diversified |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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