Correlation Between Western Asset and Science Technology
Can any of the company-specific risk be diversified away by investing in both Western Asset and Science Technology 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 Science Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Western Asset Smash and Science Technology Fund, you can compare the effects of market volatilities on Western Asset and Science Technology 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 Science Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Asset and Science Technology.
Diversification Opportunities for Western Asset and Science Technology
-0.34 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Western and Science is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset Smash and Science Technology Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Science Technology 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 Smash are associated (or correlated) with Science Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Science Technology has no effect on the direction of Western Asset i.e., Western Asset and Science Technology go up and down completely randomly.
Pair Corralation between Western Asset and Science Technology
Assuming the 90 days horizon Western Asset Smash is expected to under-perform the Science Technology. But the mutual fund apears to be less risky and, when comparing its historical volatility, Western Asset Smash is 2.44 times less risky than Science Technology. The mutual fund trades about -0.01 of its potential returns per unit of risk. The Science Technology Fund is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 1,718 in Science Technology Fund on October 9, 2024 and sell it today you would earn a total of 1,241 from holding Science Technology Fund or generate 72.24% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Western Asset Smash vs. Science Technology Fund
Performance |
| Timeline |
| Western Asset Smash |
| Science Technology |
Western Asset and Science Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Asset and Science Technology
The main advantage of trading using opposite Western Asset and Science Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Asset position performs unexpectedly, Science Technology 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 Science Technology will offset losses from the drop in Science Technology's long position.| Western Asset vs. Predex Funds | Western Asset vs. T Rowe Price | Western Asset vs. Locorr Market Trend | Western Asset vs. Qs Large Cap |
| Science Technology vs. Europac Gold Fund | Science Technology vs. World Precious Minerals | Science Technology vs. James Balanced Golden | Science Technology vs. Oppenheimer Gold Special |
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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