Correlation Between Vanguard Total and Legg Mason
Can any of the company-specific risk be diversified away by investing in both Vanguard Total 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 Total 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 Total Stock and Legg Mason Partners, you can compare the effects of market volatilities on Vanguard Total 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 Total with a short position of Legg Mason. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Total and Legg Mason.
Diversification Opportunities for Vanguard Total and Legg Mason
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Vanguard and Legg is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Total Stock and Legg Mason Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Legg Mason Partners and Vanguard Total 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 Total Stock 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 Partners has no effect on the direction of Vanguard Total i.e., Vanguard Total and Legg Mason go up and down completely randomly.
Pair Corralation between Vanguard Total and Legg Mason
Assuming the 90 days horizon Vanguard Total is expected to generate 11.84 times less return on investment than Legg Mason. But when comparing it to its historical volatility, Vanguard Total Stock is 34.8 times less risky than Legg Mason. It trades about 0.15 of its potential returns per unit of risk. Legg Mason Partners is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 95.00 in Legg Mason Partners on September 2, 2024 and sell it today you would earn a total of 5.00 from holding Legg Mason Partners or generate 5.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Total Stock vs. Legg Mason Partners
Performance |
| Timeline |
| Vanguard Total Stock |
| Legg Mason Partners |
Vanguard Total and Legg Mason Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Total and Legg Mason
The main advantage of trading using opposite Vanguard Total and Legg Mason positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Total 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 Total vs. Dunham Real Estate | Vanguard Total vs. Simt Real Estate | Vanguard Total vs. Msif Real Estate | Vanguard Total vs. Virtus Real Estate |
| Legg Mason vs. Aqr Managed Futures | Legg Mason vs. Fidelity Advisor 529 | Legg Mason vs. American Funds Inflation | Legg Mason vs. Ab Bond Inflation |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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