Correlation Between Western Asset and Tri Continental
Can any of the company-specific risk be diversified away by investing in both Western Asset and Tri Continental 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 Tri Continental into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Western Asset Emerging and Tri Continental Closed, you can compare the effects of market volatilities on Western Asset and Tri Continental 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 Tri Continental. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Asset and Tri Continental.
Diversification Opportunities for Western Asset and Tri Continental
0.5 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Western and Tri is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset Emerging and Tri Continental Closed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tri Continental 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 Emerging are associated (or correlated) with Tri Continental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tri Continental Closed has no effect on the direction of Western Asset i.e., Western Asset and Tri Continental go up and down completely randomly.
Pair Corralation between Western Asset and Tri Continental
Considering the 90-day investment horizon Western Asset Emerging is expected to generate 1.09 times more return on investment than Tri Continental. However, Western Asset is 1.09 times more volatile than Tri Continental Closed. It trades about 0.06 of its potential returns per unit of risk. Tri Continental Closed is currently generating about -0.16 per unit of risk. If you would invest 975.00 in Western Asset Emerging on December 1, 2024 and sell it today you would earn a total of 7.00 from holding Western Asset Emerging or generate 0.72% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Western Asset Emerging vs. Tri Continental Closed
Performance |
| Timeline |
| Western Asset Emerging |
| Tri Continental Closed |
Western Asset and Tri Continental Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Asset and Tri Continental
The main advantage of trading using opposite Western Asset and Tri Continental positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Asset position performs unexpectedly, Tri Continental 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 Tri Continental will offset losses from the drop in Tri Continental's long position.| Western Asset vs. Doubleline Yield Opportunities | Western Asset vs. Highland Floating Rate | Western Asset vs. Doubleline Opportunistic Credit | Western Asset vs. Alliancebernstein Global High |
| Tri Continental vs. Eaton Vance Tax | Tri Continental vs. Blackrock Muniyield | Tri Continental vs. Eaton Vance Tax | Tri Continental vs. Eaton Vance Tax |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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