Correlation Between Western Asset and Short-term Fund
Can any of the company-specific risk be diversified away by investing in both Western Asset and Short-term Fund 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 Western Asset and Short-term Fund into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Western Asset Adjustable and Short Term Fund A, you can compare the effects of market volatilities on Western Asset and Short-term Fund 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 Western Asset with a short position of Short-term Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Asset and Short-term Fund.
Diversification Opportunities for Western Asset and Short-term Fund
0.98 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Western and Short-term is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset Adjustable and Short Term Fund A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Short Term Fund and Western Asset 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 Western Asset Adjustable are associated (or correlated) with Short-term Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Short Term Fund has no effect on the direction of Western Asset i.e., Western Asset and Short-term Fund go up and down completely randomly.
Pair Corralation between Western Asset and Short-term Fund
Assuming the 90 days horizon Western Asset is expected to generate 1.05 times less return on investment than Short-term Fund. But when comparing it to its historical volatility, Western Asset Adjustable is 1.49 times less risky than Short-term Fund. It trades about 0.26 of its potential returns per unit of risk. Short Term Fund A is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest 956.00 in Short Term Fund A on September 2, 2024 and sell it today you would earn a total of 10.00 from holding Short Term Fund A or generate 1.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Western Asset Adjustable vs. Short Term Fund A
Performance |
| Timeline |
| Western Asset Adjustable |
| Short Term Fund |
Western Asset and Short-term Fund Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Asset and Short-term Fund
The main advantage of trading using opposite Western Asset and Short-term Fund positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Asset position performs unexpectedly, Short-term Fund 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 Short-term Fund will offset losses from the drop in Short-term Fund's long position.| Western Asset vs. Clearbridge Aggressive Growth | Western Asset vs. Clearbridge Small Cap | Western Asset vs. Qs International Equity | Western Asset vs. Clearbridge Appreciation Fund |
| Short-term Fund vs. Us Small Cap | Short-term Fund vs. Qs Small Capitalization | Short-term Fund vs. Tax Managed Mid Small | Short-term Fund vs. Victory Rs Small |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
Other Complementary Tools
| Cryptocurrency Center Build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency | |
| Headlines Timeline Stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity | |
| Transaction History View history of all your transactions and understand their impact on performance | |
| Commodity Directory Find actively traded commodities issued by global exchanges | |
| USA ETFs Find actively traded Exchange Traded Funds (ETF) in USA |