Correlation Between Western Asset and European Equity
Can any of the company-specific risk be diversified away by investing in both Western Asset and European Equity 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 European Equity into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Western Asset Global and European Equity Closed, you can compare the effects of market volatilities on Western Asset and European Equity 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 European Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Asset and European Equity.
Diversification Opportunities for Western Asset and European Equity
0.02 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Western and European is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset Global and European Equity Closed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on European Equity Closed 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 Global are associated (or correlated) with European Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of European Equity Closed has no effect on the direction of Western Asset i.e., Western Asset and European Equity go up and down completely randomly.
Pair Corralation between Western Asset and European Equity
Considering the 90-day investment horizon Western Asset Global is expected to generate 1.1 times more return on investment than European Equity. However, Western Asset is 1.1 times more volatile than European Equity Closed. It trades about 0.2 of its potential returns per unit of risk. European Equity Closed is currently generating about 0.12 per unit of risk. If you would invest 663.00 in Western Asset Global on October 23, 2024 and sell it today you would earn a total of 20.00 from holding Western Asset Global or generate 3.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 94.74% |
| Values | Daily Returns |
Western Asset Global vs. European Equity Closed
Performance |
| Timeline |
| Western Asset Global |
| European Equity Closed |
Western Asset and European Equity Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Asset and European Equity
The main advantage of trading using opposite Western Asset and European Equity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Asset position performs unexpectedly, European Equity 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 European Equity will offset losses from the drop in European Equity's long position.| Western Asset vs. Western Asset High | Western Asset vs. BNY Mellon High | Western Asset vs. Allspring Income Opportunities | Western Asset vs. Allianzgi Convertible Income |
| European Equity vs. XAI Octagon Floating | European Equity vs. MFS Charter Income | European Equity vs. Nuveen New York | European Equity vs. Western Asset High |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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