Correlation Between Legg Mason and Valic Company
Can any of the company-specific risk be diversified away by investing in both Legg Mason and Valic Company 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 Valic Company 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 Valic Company I, you can compare the effects of market volatilities on Legg Mason and Valic Company 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 Valic Company. Check out your portfolio center. Please also check ongoing floating volatility patterns of Legg Mason and Valic Company.
Diversification Opportunities for Legg Mason and Valic Company
0.99 | Correlation Coefficient |
No risk reduction
The 3 months correlation between Legg and Valic is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Legg Mason Partners and Valic Company I in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Valic Company I 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 Valic Company. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Valic Company I has no effect on the direction of Legg Mason i.e., Legg Mason and Valic Company go up and down completely randomly.
Pair Corralation between Legg Mason and Valic Company
Assuming the 90 days trading horizon Legg Mason Partners is expected to generate 1.08 times more return on investment than Valic Company. However, Legg Mason is 1.08 times more volatile than Valic Company I. It trades about 0.31 of its potential returns per unit of risk. Valic Company I is currently generating about 0.31 per unit of risk. If you would invest 665.00 in Legg Mason Partners on September 2, 2024 and sell it today you would earn a total of 8.00 from holding Legg Mason Partners or generate 1.2% 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. Valic Company I
Performance |
| Timeline |
| Legg Mason Partners |
| Valic Company I |
Legg Mason and Valic Company Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Legg Mason and Valic Company
The main advantage of trading using opposite Legg Mason and Valic Company positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Legg Mason position performs unexpectedly, Valic Company 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 Valic Company will offset losses from the drop in Valic Company'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 |
| Valic Company vs. Mid Cap Index | Valic Company vs. Mid Cap Strategic | Valic Company vs. Stock Index Fund | Valic Company vs. Broad Cap Value |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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