Correlation Between Western Asset and Small Midcap
Can any of the company-specific risk be diversified away by investing in both Western Asset and Small Midcap 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 Small Midcap 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 Small Midcap Dividend Income, you can compare the effects of market volatilities on Western Asset and Small Midcap 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 Small Midcap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Asset and Small Midcap.
Diversification Opportunities for Western Asset and Small Midcap
-0.51 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Western and Small is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset Adjustable and Small Midcap Dividend Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Small Midcap Dividend 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 Small Midcap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Small Midcap Dividend has no effect on the direction of Western Asset i.e., Western Asset and Small Midcap go up and down completely randomly.
Pair Corralation between Western Asset and Small Midcap
Assuming the 90 days horizon Western Asset is expected to generate 26.31 times less return on investment than Small Midcap. But when comparing it to its historical volatility, Western Asset Adjustable is 16.26 times less risky than Small Midcap. It trades about 0.1 of its potential returns per unit of risk. Small Midcap Dividend Income is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 1,859 in Small Midcap Dividend Income on November 4, 2024 and sell it today you would earn a total of 56.00 from holding Small Midcap Dividend Income or generate 3.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 95.0% |
| Values | Daily Returns |
Western Asset Adjustable vs. Small Midcap Dividend Income
Performance |
| Timeline |
| Western Asset Adjustable |
| Small Midcap Dividend |
Western Asset and Small Midcap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Asset and Small Midcap
The main advantage of trading using opposite Western Asset and Small Midcap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Asset position performs unexpectedly, Small Midcap 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 Small Midcap will offset losses from the drop in Small Midcap'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 |
| Small Midcap vs. Rbb Fund | Small Midcap vs. Barings Global Floating | Small Midcap vs. L Abbett Growth | Small Midcap vs. Alliancebernstein Global Highome |
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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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