Correlation Between Legg Mason and Transamerica Capital
Can any of the company-specific risk be diversified away by investing in both Legg Mason and Transamerica Capital 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 Capital 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 Capital Growth, you can compare the effects of market volatilities on Legg Mason and Transamerica Capital 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 Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Legg Mason and Transamerica Capital.
Diversification Opportunities for Legg Mason and Transamerica Capital
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Legg and Transamerica is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Legg Mason Partners and Transamerica Capital Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transamerica Capital 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 Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transamerica Capital has no effect on the direction of Legg Mason i.e., Legg Mason and Transamerica Capital go up and down completely randomly.
Pair Corralation between Legg Mason and Transamerica Capital
Assuming the 90 days trading horizon Legg Mason is expected to generate 4.94 times less return on investment than Transamerica Capital. But when comparing it to its historical volatility, Legg Mason Partners is 2.79 times less risky than Transamerica Capital. It trades about 0.32 of its potential returns per unit of risk. Transamerica Capital Growth is currently generating about 0.56 of returns per unit of risk over similar time horizon. If you would invest 3,347 in Transamerica Capital Growth on September 4, 2024 and sell it today you would earn a total of 862.00 from holding Transamerica Capital Growth or generate 25.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Legg Mason Partners vs. Transamerica Capital Growth
Performance |
| Timeline |
| Legg Mason Partners |
| Transamerica Capital |
Legg Mason and Transamerica Capital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Legg Mason and Transamerica Capital
The main advantage of trading using opposite Legg Mason and Transamerica Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Legg Mason position performs unexpectedly, Transamerica Capital 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 Capital will offset losses from the drop in Transamerica Capital'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 Capital vs. T Rowe Price | Transamerica Capital vs. Legg Mason Partners | Transamerica Capital vs. Templeton Emerging Markets | Transamerica Capital vs. T Rowe Price |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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