Correlation Between Inflation-protected and Western Asset
Can any of the company-specific risk be diversified away by investing in both Inflation-protected 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 Inflation-protected and Western Asset into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Inflation Protected Bond Fund and Western Asset Diversified, you can compare the effects of market volatilities on Inflation-protected 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 Inflation-protected with a short position of Western Asset. Check out your portfolio center. Please also check ongoing floating volatility patterns of Inflation-protected and Western Asset.
Diversification Opportunities for Inflation-protected and Western Asset
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Inflation-protected and Western is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Inflation Protected Bond Fund 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 Inflation-protected 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 Inflation Protected Bond Fund 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 Inflation-protected i.e., Inflation-protected and Western Asset go up and down completely randomly.
Pair Corralation between Inflation-protected and Western Asset
Assuming the 90 days horizon Inflation Protected Bond Fund is expected to generate 1.23 times more return on investment than Western Asset. However, Inflation-protected is 1.23 times more volatile than Western Asset Diversified. It trades about 0.06 of its potential returns per unit of risk. Western Asset Diversified is currently generating about -0.01 per unit of risk. If you would invest 914.00 in Inflation Protected Bond Fund on October 31, 2024 and sell it today you would earn a total of 116.00 from holding Inflation Protected Bond Fund or generate 12.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Inflation Protected Bond Fund vs. Western Asset Diversified
Performance |
| Timeline |
| Inflation Protected |
| Western Asset Diversified |
Inflation-protected and Western Asset Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Inflation-protected and Western Asset
The main advantage of trading using opposite Inflation-protected and Western Asset positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Inflation-protected 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.| Inflation-protected vs. Jhancock Diversified Macro | Inflation-protected vs. Allianzgi Diversified Income | Inflation-protected vs. Lord Abbett Diversified | Inflation-protected vs. Vy T Rowe |
| Western Asset vs. Pimco Capital Sec | Western Asset vs. Prudential Financial Services | Western Asset vs. John Hancock Financial | Western Asset vs. Gabelli Global Financial |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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