Correlation Between Vanguard Value and Legg Mason
Can any of the company-specific risk be diversified away by investing in both Vanguard Value 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 Value 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 Value Index and Legg Mason Low, you can compare the effects of market volatilities on Vanguard Value 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 Value with a short position of Legg Mason. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Value and Legg Mason.
Diversification Opportunities for Vanguard Value and Legg Mason
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Vanguard and Legg is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Value Index and Legg Mason Low in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Legg Mason Low and Vanguard Value 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 Value Index 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 Low has no effect on the direction of Vanguard Value i.e., Vanguard Value and Legg Mason go up and down completely randomly.
Pair Corralation between Vanguard Value and Legg Mason
Considering the 90-day investment horizon Vanguard Value Index is expected to generate 0.92 times more return on investment than Legg Mason. However, Vanguard Value Index is 1.09 times less risky than Legg Mason. It trades about 0.1 of its potential returns per unit of risk. Legg Mason Low is currently generating about 0.05 per unit of risk. If you would invest 13,623 in Vanguard Value Index on September 1, 2024 and sell it today you would earn a total of 4,564 from holding Vanguard Value Index or generate 33.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Value Index vs. Legg Mason Low
Performance |
| Timeline |
| Vanguard Value Index |
| Legg Mason Low |
Vanguard Value and Legg Mason Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Value and Legg Mason
The main advantage of trading using opposite Vanguard Value and Legg Mason positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Value 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 Value vs. Vanguard Growth Index | Vanguard Value vs. Vanguard Small Cap Value | Vanguard Value vs. Vanguard Mid Cap Value | Vanguard Value vs. Vanguard Small Cap Index |
| Legg Mason vs. iShares Core SP | Legg Mason vs. iShares Core MSCI | Legg Mason vs. iShares Broad USD | Legg Mason vs. iShares Core SP |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
Other Complementary Tools
| Equity Search Search for actively traded equities including funds and ETFs from over 30 global markets | |
| Portfolio Dashboard Portfolio dashboard that provides centralized access to all your investments | |
| Performance Analysis Check effects of mean-variance optimization against your current asset allocation | |
| Idea Optimizer Use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio | |
| Price Exposure Probability Analyze equity upside and downside potential for a given time horizon across multiple markets |