Correlation Between Mid Cap and Western Asset
Can any of the company-specific risk be diversified away by investing in both Mid Cap and Western 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 Mid Cap and Western Asset into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Mid Cap Value and Western Asset Diversified, you can compare the effects of market volatilities on Mid Cap and Western 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 Mid Cap with a short position of Western Asset. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mid Cap and Western Asset.
Diversification Opportunities for Mid Cap and Western Asset
-0.46 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Mid and Western is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Mid Cap Value and Western Asset Diversified in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Asset Diversified and Mid Cap 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 Mid Cap Value are associated (or correlated) with Western Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Asset Diversified has no effect on the direction of Mid Cap i.e., Mid Cap and Western Asset go up and down completely randomly.
Pair Corralation between Mid Cap and Western Asset
Assuming the 90 days horizon Mid Cap Value is expected to generate 2.77 times more return on investment than Western Asset. However, Mid Cap is 2.77 times more volatile than Western Asset Diversified. It trades about 0.28 of its potential returns per unit of risk. Western Asset Diversified is currently generating about 0.05 per unit of risk. If you would invest 1,703 in Mid Cap Value on August 31, 2024 and sell it today you would earn a total of 81.00 from holding Mid Cap Value or generate 4.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Mid Cap Value vs. Western Asset Diversified
Performance |
| Timeline |
| Mid Cap Value |
| Western Asset Diversified |
Mid Cap and Western Asset Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Mid Cap and Western Asset
The main advantage of trading using opposite Mid Cap and Western Asset positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mid Cap position performs unexpectedly, Western 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 Western Asset will offset losses from the drop in Western Asset's long position.| Mid Cap vs. Western Asset Diversified | Mid Cap vs. Tax Managed Mid Small | Mid Cap vs. Principal Lifetime Hybrid |
| Western Asset vs. Davis Financial Fund | Western Asset vs. Prudential Jennison Financial | Western Asset vs. Mesirow Financial Small | Western Asset vs. Fidelity Advisor Financial |
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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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