Correlation Between Fidelity Salem and Western Asset
Can any of the company-specific risk be diversified away by investing in both Fidelity Salem 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 Fidelity Salem and Western Asset into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fidelity Salem Street and Western Asset Municipal, you can compare the effects of market volatilities on Fidelity Salem 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 Fidelity Salem with a short position of Western Asset. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fidelity Salem and Western Asset.
Diversification Opportunities for Fidelity Salem and Western Asset
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Fidelity and Western is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Salem Street and Western Asset Municipal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Asset Municipal and Fidelity Salem 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 Fidelity Salem Street 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 Municipal has no effect on the direction of Fidelity Salem i.e., Fidelity Salem and Western Asset go up and down completely randomly.
Pair Corralation between Fidelity Salem and Western Asset
Assuming the 90 days horizon Fidelity Salem Street is expected to under-perform the Western Asset. In addition to that, Fidelity Salem is 2.36 times more volatile than Western Asset Municipal. It trades about -0.05 of its total potential returns per unit of risk. Western Asset Municipal is currently generating about 0.11 per unit of volatility. If you would invest 723.00 in Western Asset Municipal on September 1, 2024 and sell it today you would earn a total of 6.00 from holding Western Asset Municipal or generate 0.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fidelity Salem Street vs. Western Asset Municipal
Performance |
| Timeline |
| Fidelity Salem Street |
| Western Asset Municipal |
Fidelity Salem and Western Asset Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fidelity Salem and Western Asset
The main advantage of trading using opposite Fidelity Salem and Western Asset positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fidelity Salem 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.| Fidelity Salem vs. Gabelli Global Financial | Fidelity Salem vs. Angel Oak Financial | Fidelity Salem vs. Vanguard Financials Index | Fidelity Salem vs. Fidelity Advisor Financial |
| Western Asset vs. Lord Abbett Diversified | Western Asset vs. Blackrock Conservative Prprdptfinstttnl | Western Asset vs. Pioneer Diversified High | Western Asset vs. Aqr Diversified Arbitrage |
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 Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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