Correlation Between Fixed Income and Western Asset
Can any of the company-specific risk be diversified away by investing in both Fixed Income 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 Fixed Income and Western Asset into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between The Fixed Income and Western Asset Total, you can compare the effects of market volatilities on Fixed Income 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 Fixed Income with a short position of Western Asset. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fixed Income and Western Asset.
Diversification Opportunities for Fixed Income and Western Asset
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Fixed and Western is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding The Fixed Income and Western Asset Total in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Asset Total and Fixed Income 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 The Fixed Income 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 Total has no effect on the direction of Fixed Income i.e., Fixed Income and Western Asset go up and down completely randomly.
Pair Corralation between Fixed Income and Western Asset
Assuming the 90 days horizon The Fixed Income is expected to generate 1.42 times more return on investment than Western Asset. However, Fixed Income is 1.42 times more volatile than Western Asset Total. It trades about 0.06 of its potential returns per unit of risk. Western Asset Total is currently generating about 0.02 per unit of risk. If you would invest 738.00 in The Fixed Income on September 12, 2024 and sell it today you would earn a total of 7.00 from holding The Fixed Income or generate 0.95% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
The Fixed Income vs. Western Asset Total
Performance |
| Timeline |
| Fixed Income |
| Western Asset Total |
Fixed Income and Western Asset Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fixed Income and Western Asset
The main advantage of trading using opposite Fixed Income and Western Asset positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fixed Income 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.| Fixed Income vs. Goldman Sachs Government | Fixed Income vs. Davis Government Bond | Fixed Income vs. Inverse Government Long | Fixed Income vs. Schwab Government Money |
| Western Asset vs. Alpsalerian Energy Infrastructure | Western Asset vs. Firsthand Alternative Energy | Western Asset vs. Hennessy Bp Energy | Western Asset vs. Clearbridge Energy Mlp |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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