Correlation Between Western Asset and Invesco Mortgage
Can any of the company-specific risk be diversified away by investing in both Western Asset and Invesco Mortgage 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 Invesco Mortgage into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Western Asset Investment and Invesco Mortgage Capital, you can compare the effects of market volatilities on Western Asset and Invesco Mortgage 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 Invesco Mortgage. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Asset and Invesco Mortgage.
Diversification Opportunities for Western Asset and Invesco Mortgage
-0.52 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Western and Invesco is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset Investment and Invesco Mortgage Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Mortgage Capital 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 Investment are associated (or correlated) with Invesco Mortgage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Mortgage Capital has no effect on the direction of Western Asset i.e., Western Asset and Invesco Mortgage go up and down completely randomly.
Pair Corralation between Western Asset and Invesco Mortgage
Considering the 90-day investment horizon Western Asset is expected to generate 9.84 times less return on investment than Invesco Mortgage. But when comparing it to its historical volatility, Western Asset Investment is 1.89 times less risky than Invesco Mortgage. It trades about 0.01 of its potential returns per unit of risk. Invesco Mortgage Capital is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 2,334 in Invesco Mortgage Capital on September 20, 2024 and sell it today you would earn a total of 162.00 from holding Invesco Mortgage Capital or generate 6.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Western Asset Investment vs. Invesco Mortgage Capital
Performance |
| Timeline |
| Western Asset Investment |
| Invesco Mortgage Capital |
Western Asset and Invesco Mortgage Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Asset and Invesco Mortgage
The main advantage of trading using opposite Western Asset and Invesco Mortgage positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Asset position performs unexpectedly, Invesco Mortgage 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 Invesco Mortgage will offset losses from the drop in Invesco Mortgage's long position.| Western Asset vs. Pioneer Floating Rate | Western Asset vs. The Gabelli Equity | Western Asset vs. Pioneer Municipal High | Western Asset vs. Nuveen Global High |
| Invesco Mortgage vs. Western Asset Investment | Invesco Mortgage vs. Fidus Investment Corp | Invesco Mortgage vs. ClearOne | Invesco Mortgage vs. SEI Investments |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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