Correlation Between Western Asset and First Trust
Can any of the company-specific risk be diversified away by investing in both Western Asset and First Trust 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 Trust 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 First Trust Senior, you can compare the effects of market volatilities on Western Asset and First Trust 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 Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Asset and First Trust.
Diversification Opportunities for Western Asset and First Trust
-0.68 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Western and First is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset Global and First Trust Senior in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Senior 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 First Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Trust Senior has no effect on the direction of Western Asset i.e., Western Asset and First Trust go up and down completely randomly.
Pair Corralation between Western Asset and First Trust
Considering the 90-day investment horizon Western Asset Global is expected to under-perform the First Trust. In addition to that, Western Asset is 1.32 times more volatile than First Trust Senior. It trades about -0.07 of its total potential returns per unit of risk. First Trust Senior is currently generating about 0.15 per unit of volatility. If you would invest 1,023 in First Trust Senior on August 27, 2024 and sell it today you would earn a total of 17.00 from holding First Trust Senior or generate 1.66% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Western Asset Global vs. First Trust Senior
Performance |
| Timeline |
| Western Asset Global |
| First Trust Senior |
Western Asset and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Asset and First Trust
The main advantage of trading using opposite Western Asset and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Asset position performs unexpectedly, First Trust 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 Trust will offset losses from the drop in First Trust'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 |
| First Trust vs. Blackstone Gso Long | First Trust vs. Eaton Vance Senior | First Trust vs. Western Asset Global | First Trust vs. Western Asset Global |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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