Correlation Between Western Asset and Gmo Quality
Can any of the company-specific risk be diversified away by investing in both Western Asset and Gmo Quality 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 Gmo Quality 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 Gmo Quality Fund, you can compare the effects of market volatilities on Western Asset and Gmo Quality 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 Gmo Quality. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Asset and Gmo Quality.
Diversification Opportunities for Western Asset and Gmo Quality
-0.37 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Western and Gmo is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset Adjustable and Gmo Quality Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gmo Quality 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 Gmo Quality. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gmo Quality Fund has no effect on the direction of Western Asset i.e., Western Asset and Gmo Quality go up and down completely randomly.
Pair Corralation between Western Asset and Gmo Quality
Assuming the 90 days horizon Western Asset Adjustable is expected to generate 0.09 times more return on investment than Gmo Quality. However, Western Asset Adjustable is 11.41 times less risky than Gmo Quality. It trades about 0.14 of its potential returns per unit of risk. Gmo Quality Fund is currently generating about -0.04 per unit of risk. If you would invest 914.00 in Western Asset Adjustable on November 8, 2024 and sell it today you would earn a total of 4.00 from holding Western Asset Adjustable or generate 0.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Western Asset Adjustable vs. Gmo Quality Fund
Performance |
| Timeline |
| Western Asset Adjustable |
| Gmo Quality Fund |
Western Asset and Gmo Quality Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Asset and Gmo Quality
The main advantage of trading using opposite Western Asset and Gmo Quality positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Asset position performs unexpectedly, Gmo Quality 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 Gmo Quality will offset losses from the drop in Gmo Quality's long position.| Western Asset vs. Western Asset Adjustable | Western Asset vs. Short Term Fund A | Western Asset vs. Western Asset Mortgage | Western Asset vs. Western Asset Intermediate Term |
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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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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