Correlation Between Western Asset and First Investors
Can any of the company-specific risk be diversified away by investing in both Western Asset and First Investors 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 First Investors 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 First Investors Tax, you can compare the effects of market volatilities on Western Asset and First Investors 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 First Investors. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Asset and First Investors.
Diversification Opportunities for Western Asset and First Investors
-0.4 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Western and First is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset Mortgage and First Investors Tax in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Investors Tax 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 First Investors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Investors Tax has no effect on the direction of Western Asset i.e., Western Asset and First Investors go up and down completely randomly.
Pair Corralation between Western Asset and First Investors
Considering the 90-day investment horizon Western Asset is expected to generate 13.13 times less return on investment than First Investors. In addition to that, Western Asset is 1.34 times more volatile than First Investors Tax. It trades about 0.01 of its total potential returns per unit of risk. First Investors Tax is currently generating about 0.18 per unit of volatility. If you would invest 1,236 in First Investors Tax on September 4, 2024 and sell it today you would earn a total of 18.00 from holding First Investors Tax or generate 1.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Western Asset Mortgage vs. First Investors Tax
Performance |
| Timeline |
| Western Asset Mortgage |
| First Investors Tax |
Western Asset and First Investors Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Asset and First Investors
The main advantage of trading using opposite Western Asset and First Investors positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Asset position performs unexpectedly, First Investors 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 First Investors will offset losses from the drop in First Investors' 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 |
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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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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