Correlation Between Templeton Developing and Legg Mason
Can any of the company-specific risk be diversified away by investing in both Templeton Developing 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 Templeton Developing and Legg Mason into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Templeton Developing Markets and Legg Mason Partners, you can compare the effects of market volatilities on Templeton Developing 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 Templeton Developing with a short position of Legg Mason. Check out your portfolio center. Please also check ongoing floating volatility patterns of Templeton Developing and Legg Mason.
Diversification Opportunities for Templeton Developing and Legg Mason
0.15 | Correlation Coefficient |
Average diversification
The 3 months correlation between Templeton and Legg is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Templeton Developing Markets 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 Templeton Developing 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 Templeton Developing Markets 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 Templeton Developing i.e., Templeton Developing and Legg Mason go up and down completely randomly.
Pair Corralation between Templeton Developing and Legg Mason
Assuming the 90 days horizon Templeton Developing is expected to generate 45.16 times less return on investment than Legg Mason. But when comparing it to its historical volatility, Templeton Developing Markets is 29.28 times less risky than Legg Mason. It trades about 0.04 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 343.00 in Legg Mason Partners on September 3, 2024 and sell it today you would lose (243.00) from holding Legg Mason Partners or give up 70.85% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 98.8% |
| Values | Daily Returns |
Templeton Developing Markets vs. Legg Mason Partners
Performance |
| Timeline |
| Templeton Developing |
| Legg Mason Partners |
Templeton Developing and Legg Mason Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Templeton Developing and Legg Mason
The main advantage of trading using opposite Templeton Developing and Legg Mason positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Templeton Developing 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.| Templeton Developing vs. Franklin Mutual Global | Templeton Developing vs. Templeton Growth Fund | Templeton Developing vs. Franklin Real Estate | Templeton Developing vs. HUMANA INC |
| Legg Mason vs. Vanguard Total Stock | Legg Mason vs. Vanguard 500 Index | Legg Mason vs. Vanguard Total Stock | Legg Mason vs. Vanguard Total Stock |
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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