Correlation Between Legg Mason and Neuberger Berman

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

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

Diversification Opportunities for Legg Mason and Neuberger Berman

0.88

Correlation Coefficient

Legg Mason  Neuberger Berman

Very poor diversification

The 3 months correlation between Legg and Neuberger is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Legg Mason Bw and Neuberger Berman Intl in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Neuberger Berman Intl 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 Bw are associated (or correlated) with Neuberger Berman. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Neuberger Berman Intl has no effect on the direction of Legg Mason i.e., Legg Mason and Neuberger Berman go up and down completely randomly.

Pair Corralation between Legg Mason and Neuberger Berman

Assuming the 90 days horizon Legg Mason Bw is expected to under-perform the Neuberger Berman. But the mutual fund apears to be less risky and, when comparing its historical volatility, Legg Mason Bw is 1.04 times less risky than Neuberger Berman. The mutual fund trades about -0.02 of its potential returns per unit of risk. The Neuberger Berman Intl is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  1,376  in Neuberger Berman Intl on December 2, 2024 and sell it today you would earn a total of  37.00  from holding Neuberger Berman Intl or generate 2.69% return on investment over 90 days.

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

Legg Mason Bw  vs.  Neuberger Berman Intl

Legg Mason Bw

Risk-Adjusted Performance

Very Weak

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

Neuberger Berman Intl

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Neuberger Berman Intl are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong essential indicators, Neuberger Berman 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 Neuberger Berman

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

The idea behind Legg Mason Bw and Neuberger Berman Intl 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.