Correlation Between Legg Mason and Transamerica Financial
Can any of the company-specific risk be diversified away by investing in both Legg Mason and Transamerica Financial 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 Transamerica Financial 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 Transamerica Financial Life, you can compare the effects of market volatilities on Legg Mason and Transamerica Financial 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 Transamerica Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Legg Mason and Transamerica Financial.
Diversification Opportunities for Legg Mason and Transamerica Financial
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Legg and Transamerica is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Legg Mason Bw and Transamerica Financial Life in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transamerica Financial 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 Transamerica Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transamerica Financial has no effect on the direction of Legg Mason i.e., Legg Mason and Transamerica Financial go up and down completely randomly.
Pair Corralation between Legg Mason and Transamerica Financial
Assuming the 90 days horizon Legg Mason Bw is expected to under-perform the Transamerica Financial. But the mutual fund apears to be less risky and, when comparing its historical volatility, Legg Mason Bw is 1.1 times less risky than Transamerica Financial. The mutual fund trades about -0.08 of its potential returns per unit of risk. The Transamerica Financial Life is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest 1,223 in Transamerica Financial Life on September 12, 2024 and sell it today you would lose (8.00) from holding Transamerica Financial Life or give up 0.65% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Legg Mason Bw vs. Transamerica Financial Life
Performance |
| Timeline |
| Legg Mason Bw |
| Transamerica Financial |
Legg Mason and Transamerica Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Legg Mason and Transamerica Financial
The main advantage of trading using opposite Legg Mason and Transamerica Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Legg Mason position performs unexpectedly, Transamerica Financial 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 Transamerica Financial will offset losses from the drop in Transamerica Financial's long position.| Legg Mason vs. Simt Multi Asset Inflation | Legg Mason vs. Loomis Sayles Inflation | Legg Mason vs. Guggenheim Managed Futures | Legg Mason vs. Ab Bond Inflation |
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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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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