Correlation Between Federated Institutional and Western Asset
Can any of the company-specific risk be diversified away by investing in both Federated Institutional and Western Asset 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 Federated Institutional and Western Asset into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Federated Institutional High and Western Asset E, you can compare the effects of market volatilities on Federated Institutional and Western Asset 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 Federated Institutional with a short position of Western Asset. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federated Institutional and Western Asset.
Diversification Opportunities for Federated Institutional and Western Asset
-0.1 | Correlation Coefficient |
Good diversification
The 3 months correlation between FEDERATED and Western is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Federated Institutional High and Western Asset E in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Asset E and Federated Institutional 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 Federated Institutional High are associated (or correlated) with Western Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Asset E has no effect on the direction of Federated Institutional i.e., Federated Institutional and Western Asset go up and down completely randomly.
Pair Corralation between Federated Institutional and Western Asset
Assuming the 90 days horizon Federated Institutional is expected to generate 2.79 times less return on investment than Western Asset. But when comparing it to its historical volatility, Federated Institutional High is 2.97 times less risky than Western Asset. It trades about 0.12 of its potential returns per unit of risk. Western Asset E is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 922.00 in Western Asset E on September 1, 2024 and sell it today you would earn a total of 9.00 from holding Western Asset E or generate 0.98% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 95.45% |
Values | Daily Returns |
Federated Institutional High vs. Western Asset E
Performance |
Timeline |
Federated Institutional |
Western Asset E |
Federated Institutional and Western Asset Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Federated Institutional and Western Asset
The main advantage of trading using opposite Federated Institutional and Western Asset positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Federated Institutional position performs unexpectedly, Western Asset 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 Western Asset will offset losses from the drop in Western Asset's long position.The idea behind Federated Institutional High and Western Asset E pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
Western Asset vs. Franklin High Income | Western Asset vs. T Rowe Price | Western Asset vs. Ab Global Risk | Western Asset vs. Federated Institutional 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
Other Complementary Tools
Positions Ratings Determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
Portfolio Center All portfolio management and optimization tools to improve performance of your portfolios | |
Commodity Directory Find actively traded commodities issued by global exchanges | |
Portfolio Backtesting Avoid under-diversification and over-optimization by backtesting your portfolios | |
Investing Opportunities Build portfolios using our predefined set of ideas and optimize them against your investing preferences |