Correlation Between Federated Emerging and Legg Mason
Can any of the company-specific risk be diversified away by investing in both Federated Emerging 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 Federated Emerging and Legg Mason into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Federated Emerging Market and Legg Mason Partners, you can compare the effects of market volatilities on Federated Emerging 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 Federated Emerging with a short position of Legg Mason. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federated Emerging and Legg Mason.
Diversification Opportunities for Federated Emerging and Legg Mason
0.04 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Federated and Legg is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Federated Emerging Market 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 Federated Emerging 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 Federated Emerging Market 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 Federated Emerging i.e., Federated Emerging and Legg Mason go up and down completely randomly.
Pair Corralation between Federated Emerging and Legg Mason
Assuming the 90 days horizon Federated Emerging is expected to generate 1.04 times less return on investment than Legg Mason. But when comparing it to its historical volatility, Federated Emerging Market is 2.25 times less risky than Legg Mason. It trades about 0.13 of its potential returns per unit of risk. Legg Mason Partners is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 1,770 in Legg Mason Partners on November 27, 2024 and sell it today you would earn a total of 422.00 from holding Legg Mason Partners or generate 23.84% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 99.8% |
| Values | Daily Returns |
Federated Emerging Market vs. Legg Mason Partners
Performance |
| Timeline |
| Federated Emerging Market |
| Legg Mason Partners |
Federated Emerging and Legg Mason Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Federated Emerging and Legg Mason
The main advantage of trading using opposite Federated Emerging and Legg Mason positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Federated Emerging 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.| Federated Emerging vs. Glg Intl Small | Federated Emerging vs. Guidemark E Fixed | Federated Emerging vs. Shelton Emerging Markets | Federated Emerging vs. Arrow Managed Futures |
| Legg Mason vs. Allianzgi Small Cap Blend | Legg Mason vs. T Rowe Price | Legg Mason vs. Ultrasmall Cap Profund Ultrasmall Cap | Legg Mason vs. Inverse Mid Cap Strategy |
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.
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