Correlation Between Western Asset and Optimum Small-mid
Can any of the company-specific risk be diversified away by investing in both Western Asset and Optimum Small-mid 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 Optimum Small-mid 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 Optimum Small Mid Cap, you can compare the effects of market volatilities on Western Asset and Optimum Small-mid 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 Optimum Small-mid. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Asset and Optimum Small-mid.
Diversification Opportunities for Western Asset and Optimum Small-mid
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Western and Optimum is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset Mortgage and Optimum Small Mid Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Optimum Small Mid 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 Optimum Small-mid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Optimum Small Mid has no effect on the direction of Western Asset i.e., Western Asset and Optimum Small-mid go up and down completely randomly.
Pair Corralation between Western Asset and Optimum Small-mid
Considering the 90-day investment horizon Western Asset is expected to generate 1.79 times less return on investment than Optimum Small-mid. But when comparing it to its historical volatility, Western Asset Mortgage is 2.47 times less risky than Optimum Small-mid. It trades about 0.14 of its potential returns per unit of risk. Optimum Small Mid Cap is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 1,464 in Optimum Small Mid Cap on August 31, 2024 and sell it today you would earn a total of 217.00 from holding Optimum Small Mid Cap or generate 14.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.21% |
| Values | Daily Returns |
Western Asset Mortgage vs. Optimum Small Mid Cap
Performance |
| Timeline |
| Western Asset Mortgage |
| Optimum Small Mid |
Western Asset and Optimum Small-mid Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Asset and Optimum Small-mid
The main advantage of trading using opposite Western Asset and Optimum Small-mid positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Asset position performs unexpectedly, Optimum Small-mid 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 Optimum Small-mid will offset losses from the drop in Optimum Small-mid's long position.| Western Asset vs. MFS Investment Grade | Western Asset vs. Eaton Vance Municipal | Western Asset vs. DTF Tax Free | Western Asset vs. HUMANA INC |
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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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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