Correlation Between Western Asset and Nuveen Variable
Can any of the company-specific risk be diversified away by investing in both Western Asset and Nuveen Variable 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 Nuveen Variable 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 Nuveen Variable Rate, you can compare the effects of market volatilities on Western Asset and Nuveen Variable 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 Nuveen Variable. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Asset and Nuveen Variable.
Diversification Opportunities for Western Asset and Nuveen Variable
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Western and Nuveen is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset Mortgage and Nuveen Variable Rate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nuveen Variable Rate 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 Nuveen Variable. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nuveen Variable Rate has no effect on the direction of Western Asset i.e., Western Asset and Nuveen Variable go up and down completely randomly.
Pair Corralation between Western Asset and Nuveen Variable
Considering the 90-day investment horizon Western Asset Mortgage is expected to under-perform the Nuveen Variable. But the fund apears to be less risky and, when comparing its historical volatility, Western Asset Mortgage is 1.27 times less risky than Nuveen Variable. The fund trades about 0.0 of its potential returns per unit of risk. The Nuveen Variable Rate is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 1,876 in Nuveen Variable Rate on August 24, 2024 and sell it today you would earn a total of 26.00 from holding Nuveen Variable Rate or generate 1.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Western Asset Mortgage vs. Nuveen Variable Rate
Performance |
| Timeline |
| Western Asset Mortgage |
| Nuveen Variable Rate |
Western Asset and Nuveen Variable Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Asset and Nuveen Variable
The main advantage of trading using opposite Western Asset and Nuveen Variable positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Asset position performs unexpectedly, Nuveen Variable 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 Nuveen Variable will offset losses from the drop in Nuveen Variable'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 |
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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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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