Correlation Between Legg Mason and Nuveen New

Can any of the company-specific risk be diversified away by investing in both Legg Mason and Nuveen New 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 Nuveen New into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Legg Mason Global and Nuveen New York, you can compare the effects of market volatilities on Legg Mason and Nuveen New 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 Nuveen New. Check out your portfolio center. Please also check ongoing floating volatility patterns of Legg Mason and Nuveen New.

Diversification Opportunities for Legg Mason and Nuveen New

0.83

Correlation Coefficient

Legg Mason  Nuveen New

Very poor diversification

The 3 months correlation between Legg and Nuveen is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Legg Mason Global and Nuveen New York in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nuveen New York 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 Global are associated (or correlated) with Nuveen New. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nuveen New York has no effect on the direction of Legg Mason i.e., Legg Mason and Nuveen New go up and down completely randomly.

Pair Corralation between Legg Mason and Nuveen New

Assuming the 90 days horizon Legg Mason Global is expected to under-perform the Nuveen New. But the mutual fund apears to be less risky and, when comparing its historical volatility, Legg Mason Global is 1.2 times less risky than Nuveen New. The mutual fund trades about -0.22 of its potential returns per unit of risk. The Nuveen New York is currently generating about -0.14 of returns per unit of risk over similar time horizon. If you would invest  1,267  in Nuveen New York on October 1, 2024 and sell it today you would lose (60.00) from holding Nuveen New York or give up 4.74% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Legg Mason Global  vs.  Nuveen New York

Legg Mason Global

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Legg Mason Global has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental indicators, Legg Mason is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Nuveen New York

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nuveen New York has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Nuveen New is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Legg Mason and Nuveen New

The main advantage of trading using opposite Legg Mason and Nuveen New positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Legg Mason position performs unexpectedly, Nuveen New 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 Nuveen New will offset losses from the drop in Nuveen New's long position.

The idea behind Legg Mason Global and Nuveen New York pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.