Correlation Between Transamerica Bond and Legg Mason

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

By analyzing existing cross correlation between Transamerica Bond Class and Legg Mason Bw, you can compare the effects of market volatilities on Transamerica Bond 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 Transamerica Bond with a short position of Legg Mason. Check out your portfolio center. Please also check ongoing floating volatility patterns of Transamerica Bond and Legg Mason.

Diversification Opportunities for Transamerica Bond and Legg Mason

0.1

Correlation Coefficient

Transamerica Bond  Legg Mason

Average diversification

The 3 months correlation between Transamerica and Legg is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Transamerica Bond Class and Legg Mason Bw in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Legg Mason Bw and Transamerica Bond 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 Transamerica Bond Class 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 Bw has no effect on the direction of Transamerica Bond i.e., Transamerica Bond and Legg Mason go up and down completely randomly.

Pair Corralation between Transamerica Bond and Legg Mason

Assuming the 90 days horizon Transamerica Bond is expected to generate 1.19 times less return on investment than Legg Mason. But when comparing it to its historical volatility, Transamerica Bond Class is 2.9 times less risky than Legg Mason. It trades about 0.13 of its potential returns per unit of risk. Legg Mason Bw is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  2,030  in Legg Mason Bw on December 25, 2024 and sell it today you would earn a total of  50.00  from holding Legg Mason Bw or generate 2.46% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

Transamerica Bond Class  vs.  Legg Mason Bw

Transamerica Bond Class

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Transamerica Bond Class are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Transamerica Bond is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Legg Mason Bw

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Legg Mason Bw are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Legg Mason is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Transamerica Bond and Legg Mason

The main advantage of trading using opposite Transamerica Bond and Legg Mason positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Transamerica Bond 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.

The idea behind Transamerica Bond Class and Legg Mason Bw 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.