Correlation Between Western Asset and Rational Dividend
Can any of the company-specific risk be diversified away by investing in both Western Asset and Rational Dividend 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 Rational Dividend 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 Rational Dividend Capture, you can compare the effects of market volatilities on Western Asset and Rational Dividend 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 Rational Dividend. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Asset and Rational Dividend.
Diversification Opportunities for Western Asset and Rational Dividend
0.53 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Western and Rational is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset Adjustable and Rational Dividend Capture in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rational Dividend Capture 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 Rational Dividend. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rational Dividend Capture has no effect on the direction of Western Asset i.e., Western Asset and Rational Dividend go up and down completely randomly.
Pair Corralation between Western Asset and Rational Dividend
Assuming the 90 days horizon Western Asset is expected to generate 31.03 times less return on investment than Rational Dividend. But when comparing it to its historical volatility, Western Asset Adjustable is 10.82 times less risky than Rational Dividend. It trades about 0.1 of its potential returns per unit of risk. Rational Dividend Capture is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest 938.00 in Rational Dividend Capture on November 4, 2024 and sell it today you would earn a total of 34.00 from holding Rational Dividend Capture or generate 3.62% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.0% |
| Values | Daily Returns |
Western Asset Adjustable vs. Rational Dividend Capture
Performance |
| Timeline |
| Western Asset Adjustable |
| Rational Dividend Capture |
Western Asset and Rational Dividend Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Asset and Rational Dividend
The main advantage of trading using opposite Western Asset and Rational Dividend positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Asset position performs unexpectedly, Rational Dividend 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 Rational Dividend will offset losses from the drop in Rational Dividend'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 |
| Rational Dividend vs. Growth Portfolio Class | Rational Dividend vs. Rbb Fund | Rational Dividend vs. Federated Emerging Market | Rational Dividend vs. Glg Intl 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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