Correlation Between Capital Management and Western Asset
Can any of the company-specific risk be diversified away by investing in both Capital Management 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 Capital Management and Western Asset into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Capital Management Mid Cap and Western Asset High, you can compare the effects of market volatilities on Capital Management 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 Capital Management with a short position of Western Asset. Check out your portfolio center. Please also check ongoing floating volatility patterns of Capital Management and Western Asset.
Diversification Opportunities for Capital Management and Western Asset
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Capital and Western is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Capital Management Mid Cap and Western Asset High in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Asset High and Capital Management 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 Capital Management Mid Cap 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 High has no effect on the direction of Capital Management i.e., Capital Management and Western Asset go up and down completely randomly.
Pair Corralation between Capital Management and Western Asset
Assuming the 90 days horizon Capital Management Mid Cap is expected to generate 8.56 times more return on investment than Western Asset. However, Capital Management is 8.56 times more volatile than Western Asset High. It trades about 0.38 of its potential returns per unit of risk. Western Asset High is currently generating about 0.15 per unit of risk. If you would invest 2,815 in Capital Management Mid Cap on September 3, 2024 and sell it today you would earn a total of 264.00 from holding Capital Management Mid Cap or generate 9.38% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Capital Management Mid Cap vs. Western Asset High
Performance |
| Timeline |
| Capital Management Mid |
| Western Asset High |
Capital Management and Western Asset Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Capital Management and Western Asset
The main advantage of trading using opposite Capital Management and Western Asset positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Capital Management 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.| Capital Management vs. Western Asset High | Capital Management vs. Calvert High Yield | Capital Management vs. Metropolitan West High | Capital Management vs. Nuveen High Income |
| Western Asset vs. Oklahoma College Savings | Western Asset vs. Massmutual Select Diversified | Western Asset vs. Jpmorgan Emerging Markets | Western Asset vs. Locorr Market Trend |
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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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