Correlation Between American Funds and Western Asset
Can any of the company-specific risk be diversified away by investing in both American Funds 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 American Funds and Western Asset into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Funds Income and Western Asset Diversified, you can compare the effects of market volatilities on American Funds 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 American Funds with a short position of Western Asset. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Funds and Western Asset.
Diversification Opportunities for American Funds and Western Asset
0.02 | Correlation Coefficient |
Significant diversification
The 3 months correlation between American and Western is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding American Funds Income and Western Asset Diversified in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Asset Diversified and American Funds 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 American Funds 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 Diversified has no effect on the direction of American Funds i.e., American Funds and Western Asset go up and down completely randomly.
Pair Corralation between American Funds and Western Asset
Assuming the 90 days horizon American Funds Income is expected to generate 1.08 times more return on investment than Western Asset. However, American Funds is 1.08 times more volatile than Western Asset Diversified. It trades about 0.14 of its potential returns per unit of risk. Western Asset Diversified is currently generating about 0.02 per unit of risk. If you would invest 1,150 in American Funds Income on September 12, 2024 and sell it today you would earn a total of 222.00 from holding American Funds Income or generate 19.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Funds Income vs. Western Asset Diversified
Performance |
| Timeline |
| American Funds Income |
| Western Asset Diversified |
American Funds and Western Asset Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Funds and Western Asset
The main advantage of trading using opposite American Funds and Western Asset positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Funds 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.| American Funds vs. Western Asset Diversified | American Funds vs. Delaware Limited Term Diversified | American Funds vs. Blackrock Sm Cap | American Funds vs. Adams Diversified Equity |
| Western Asset vs. Vanguard Total Stock | Western Asset vs. Vanguard 500 Index | Western Asset vs. Vanguard Total Stock | Western Asset vs. Vanguard Total Stock |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
Other Complementary Tools
| Sign In To Macroaxis Sign in to explore Macroaxis' wealth optimization platform and fintech modules | |
| Correlation Analysis Reduce portfolio risk simply by holding instruments which are not perfectly correlated | |
| Pair Correlation Compare performance and examine fundamental relationship between any two equity instruments | |
| Insider Screener Find insiders across different sectors to evaluate their impact on performance | |
| Volatility Analysis Get historical volatility and risk analysis based on latest market data |