Correlation Between Western Asset and Delaware Small
Can any of the company-specific risk be diversified away by investing in both Western Asset and Delaware Small 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 Delaware Small into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Western Asset Mortgage and Delaware Small Cap, you can compare the effects of market volatilities on Western Asset and Delaware Small 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 Delaware Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Asset and Delaware Small.
Diversification Opportunities for Western Asset and Delaware Small
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Western and Delaware is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset Mortgage and Delaware Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Delaware Small Cap 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 Mortgage are associated (or correlated) with Delaware Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Delaware Small Cap has no effect on the direction of Western Asset i.e., Western Asset and Delaware Small go up and down completely randomly.
Pair Corralation between Western Asset and Delaware Small
Considering the 90-day investment horizon Western Asset is expected to generate 9.24 times less return on investment than Delaware Small. But when comparing it to its historical volatility, Western Asset Mortgage is 2.72 times less risky than Delaware Small. It trades about 0.1 of its potential returns per unit of risk. Delaware Small Cap is currently generating about 0.33 of returns per unit of risk over similar time horizon. If you would invest 3,009 in Delaware Small Cap on September 1, 2024 and sell it today you would earn a total of 337.00 from holding Delaware Small Cap or generate 11.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Western Asset Mortgage vs. Delaware Small Cap
Performance |
| Timeline |
| Western Asset Mortgage |
| Delaware Small Cap |
Western Asset and Delaware Small Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Asset and Delaware Small
The main advantage of trading using opposite Western Asset and Delaware Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Asset position performs unexpectedly, Delaware Small 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 Delaware Small will offset losses from the drop in Delaware Small's long position.| Western Asset vs. Western Asset High | Western Asset vs. Pioneer Municipal High | Western Asset vs. Doubleline Income Solutions | Western Asset vs. Doubleline Yield Opportunities |
| Delaware Small vs. Guidepath Managed Futures | Delaware Small vs. Ab Bond Inflation | Delaware Small vs. Asg Managed Futures | Delaware Small vs. American Funds Inflation |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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