Correlation Between Touchstone International and Legg Mason

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

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

Diversification Opportunities for Touchstone International and Legg Mason

0.91

Correlation Coefficient

Touchstone International  Legg Mason

Almost no diversification

The 3 months correlation between Touchstone and Legg is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Touchstone International Equit and Legg Mason Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Legg Mason Global and Touchstone International 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 Touchstone International Equity 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 Global has no effect on the direction of Touchstone International i.e., Touchstone International and Legg Mason go up and down completely randomly.

Pair Corralation between Touchstone International and Legg Mason

Assuming the 90 days horizon Touchstone International Equity is expected to generate 4.26 times more return on investment than Legg Mason. However, Touchstone International is 4.26 times more volatile than Legg Mason Global. It trades about 0.26 of its potential returns per unit of risk. Legg Mason Global is currently generating about 0.16 per unit of risk. If you would invest  1,370  in Touchstone International Equity on December 29, 2024 and sell it today you would earn a total of  206.00  from holding Touchstone International Equity or generate 15.04% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Touchstone International Equit  vs.  Legg Mason Global

Touchstone International

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Touchstone International Equity are ranked lower than 20 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Touchstone International showed solid returns over the last few months and may actually be approaching a breakup point.

Legg Mason Global

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Legg Mason Global are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. 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.

Pair Trading with Touchstone International and Legg Mason

The main advantage of trading using opposite Touchstone International and Legg Mason positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Touchstone International 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 Touchstone International Equity and Legg Mason Global 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.