Correlation Between Rational Defensive and Western Asset
Can any of the company-specific risk be diversified away by investing in both Rational Defensive 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 Rational Defensive and Western Asset into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Rational Defensive Growth and Western Asset Intermediate, you can compare the effects of market volatilities on Rational Defensive 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 Rational Defensive with a short position of Western Asset. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rational Defensive and Western Asset.
Diversification Opportunities for Rational Defensive and Western Asset
-0.53 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Rational and Western is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Rational Defensive Growth and Western Asset Intermediate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Asset Interm and Rational Defensive 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 Rational Defensive Growth 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 Interm has no effect on the direction of Rational Defensive i.e., Rational Defensive and Western Asset go up and down completely randomly.
Pair Corralation between Rational Defensive and Western Asset
Assuming the 90 days horizon Rational Defensive Growth is expected to generate 6.21 times more return on investment than Western Asset. However, Rational Defensive is 6.21 times more volatile than Western Asset Intermediate. It trades about 0.09 of its potential returns per unit of risk. Western Asset Intermediate is currently generating about 0.05 per unit of risk. If you would invest 2,475 in Rational Defensive Growth on August 28, 2024 and sell it today you would earn a total of 1,493 from holding Rational Defensive Growth or generate 60.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Rational Defensive Growth vs. Western Asset Intermediate
Performance |
| Timeline |
| Rational Defensive Growth |
| Western Asset Interm |
Rational Defensive and Western Asset Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Rational Defensive and Western Asset
The main advantage of trading using opposite Rational Defensive and Western Asset positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rational Defensive 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.| Rational Defensive vs. Small Pany Growth | Rational Defensive vs. Crafword Dividend Growth | Rational Defensive vs. Mid Cap Growth | Rational Defensive vs. L Abbett Growth |
| Western Asset vs. Clearbridge Aggressive Growth | Western Asset vs. Clearbridge Small Cap | Western Asset vs. Qs International Equity | Western Asset vs. Clearbridge Appreciation Fund |
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 Stocks Directory module to find actively traded stocks across global markets.
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