Correlation Between Legg Mason and Transamerica Emerging
Can any of the company-specific risk be diversified away by investing in both Legg Mason and Transamerica Emerging 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 Emerging into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Legg Mason Partners and Transamerica Emerging Markets, you can compare the effects of market volatilities on Legg Mason and Transamerica Emerging 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 Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of Legg Mason and Transamerica Emerging.
Diversification Opportunities for Legg Mason and Transamerica Emerging
0.26 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Legg and Transamerica is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Legg Mason Partners and Transamerica Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transamerica Emerging 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 Partners are associated (or correlated) with Transamerica Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transamerica Emerging has no effect on the direction of Legg Mason i.e., Legg Mason and Transamerica Emerging go up and down completely randomly.
Pair Corralation between Legg Mason and Transamerica Emerging
Assuming the 90 days trading horizon Legg Mason Partners is expected to generate 0.97 times more return on investment than Transamerica Emerging. However, Legg Mason Partners is 1.03 times less risky than Transamerica Emerging. It trades about 0.18 of its potential returns per unit of risk. Transamerica Emerging Markets is currently generating about -0.15 per unit of risk. If you would invest 2,386 in Legg Mason Partners on August 29, 2024 and sell it today you would earn a total of 74.00 from holding Legg Mason Partners or generate 3.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
Legg Mason Partners vs. Transamerica Emerging Markets
Performance |
| Timeline |
| Legg Mason Partners |
| Transamerica Emerging |
Legg Mason and Transamerica Emerging Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Legg Mason and Transamerica Emerging
The main advantage of trading using opposite Legg Mason and Transamerica Emerging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Legg Mason position performs unexpectedly, Transamerica Emerging 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 Emerging will offset losses from the drop in Transamerica Emerging's long position.| Legg Mason vs. Vanguard Total Stock | Legg Mason vs. Vanguard 500 Index | Legg Mason vs. Vanguard Total Stock | Legg Mason vs. Vanguard Total Stock |
| Transamerica Emerging vs. Vanguard Emerging Markets | Transamerica Emerging vs. Vanguard Emerging Markets | Transamerica Emerging vs. HUMANA INC | Transamerica Emerging vs. Aquagold International |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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