Correlation Between Federated Emerging and Western Asset
Can any of the company-specific risk be diversified away by investing in both Federated Emerging 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 Emerging 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 Emerging Market and Western Asset E, you can compare the effects of market volatilities on Federated Emerging 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 Emerging with a short position of Western Asset. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federated Emerging and Western Asset.
Diversification Opportunities for Federated Emerging and Western Asset
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Federated and WESTERN is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Federated Emerging Market 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 Emerging 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 Emerging Market 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 Emerging i.e., Federated Emerging and Western Asset go up and down completely randomly.
Pair Corralation between Federated Emerging and Western Asset
Assuming the 90 days horizon Federated Emerging is expected to generate 1.22 times less return on investment than Western Asset. But when comparing it to its historical volatility, Federated Emerging Market is 1.26 times less risky than Western Asset. It trades about 0.13 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 10.00 from holding Western Asset E or generate 1.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Federated Emerging Market vs. Western Asset E
Performance |
| Timeline |
| Federated Emerging Market |
| Western Asset E |
Federated Emerging and Western Asset Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Federated Emerging and Western Asset
The main advantage of trading using opposite Federated Emerging and Western Asset positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Federated Emerging 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.| Federated Emerging vs. Fidelity Advisor Financial | Federated Emerging vs. 1919 Financial Services | Federated Emerging vs. Mesirow Financial Small | Federated Emerging vs. John Hancock Financial |
| 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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