Correlation Between Legg Mason and Voya Emerging

Can any of the company-specific risk be diversified away by investing in both Legg Mason and Voya 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 Voya Emerging into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Legg Mason Global and Voya Emerging Markets, you can compare the effects of market volatilities on Legg Mason and Voya 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 Voya Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of Legg Mason and Voya Emerging.

Diversification Opportunities for Legg Mason and Voya Emerging

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Correlation Coefficient

Legg Mason  Voya Emerging

Pay attention - limited upside

The 3 months correlation between Legg and Voya is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Legg Mason Global and Voya Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Voya Emerging Markets 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 Global are associated (or correlated) with Voya Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Voya Emerging Markets has no effect on the direction of Legg Mason i.e., Legg Mason and Voya Emerging go up and down completely randomly.

Pair Corralation between Legg Mason and Voya Emerging

Assuming the 90 days horizon Legg Mason is expected to generate 2.11 times less return on investment than Voya Emerging. In addition to that, Legg Mason is 1.93 times more volatile than Voya Emerging Markets. It trades about 0.03 of its total potential returns per unit of risk. Voya Emerging Markets is currently generating about 0.13 per unit of volatility. If you would invest  772.00  in Voya Emerging Markets on October 23, 2024 and sell it today you would earn a total of  99.00  from holding Voya Emerging Markets or generate 12.82% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	98.79%
Values	Daily Returns

Legg Mason Global  vs.  Voya Emerging Markets

Legg Mason Global

Risk-Adjusted Performance

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Very Weak

Over the last 90 days Legg Mason Global has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental indicators, Legg Mason is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Voya Emerging Markets

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Voya Emerging Markets has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental indicators, Voya Emerging is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Legg Mason and Voya Emerging

The main advantage of trading using opposite Legg Mason and Voya Emerging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Legg Mason position performs unexpectedly, Voya 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 Voya Emerging will offset losses from the drop in Voya Emerging's long position.

The idea behind Legg Mason Global and Voya Emerging Markets pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.