Correlation Between Legg Mason and Transamerica Asset
Can any of the company-specific risk be diversified away by investing in both Legg Mason and Transamerica Asset 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 Asset 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 Asset Allocation, you can compare the effects of market volatilities on Legg Mason and Transamerica Asset 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 Asset. Check out your portfolio center. Please also check ongoing floating volatility patterns of Legg Mason and Transamerica Asset.
Diversification Opportunities for Legg Mason and Transamerica Asset
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Legg and TRANSAMERICA is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Legg Mason Partners and Transamerica Asset Allocation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transamerica Asset 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 Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transamerica Asset has no effect on the direction of Legg Mason i.e., Legg Mason and Transamerica Asset go up and down completely randomly.
Pair Corralation between Legg Mason and Transamerica Asset
Assuming the 90 days trading horizon Legg Mason Partners is expected to generate 0.59 times more return on investment than Transamerica Asset. However, Legg Mason Partners is 1.71 times less risky than Transamerica Asset. It trades about -0.08 of its potential returns per unit of risk. Transamerica Asset Allocation is currently generating about -0.07 per unit of risk. If you would invest 1,313 in Legg Mason Partners on December 1, 2024 and sell it today you would lose (41.00) from holding Legg Mason Partners or give up 3.12% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 98.36% |
Values | Daily Returns |
Legg Mason Partners vs. Transamerica Asset Allocation
Performance |
Timeline |
Legg Mason Partners |
Transamerica Asset |
Legg Mason and Transamerica Asset Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Legg Mason and Transamerica Asset
The main advantage of trading using opposite Legg Mason and Transamerica Asset positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Legg Mason position performs unexpectedly, Transamerica Asset 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 Asset will offset losses from the drop in Transamerica Asset's long position.Legg Mason vs. Vanguard Energy Index | Legg Mason vs. Pimco Energy Tactical | Legg Mason vs. Transamerica Mlp Energy | Legg Mason vs. Alpsalerian Energy Infrastructure |
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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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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