Correlation Between Western Asset and Vanguard Short-term
Can any of the company-specific risk be diversified away by investing in both Western Asset and Vanguard Short-term 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 Vanguard Short-term into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Western Asset Pennsylvania and Vanguard Short Term Bond, you can compare the effects of market volatilities on Western Asset and Vanguard Short-term 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 Vanguard Short-term. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Asset and Vanguard Short-term.
Diversification Opportunities for Western Asset and Vanguard Short-term
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Western and Vanguard is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset Pennsylvania and Vanguard Short Term Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Short Term 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 Pennsylvania are associated (or correlated) with Vanguard Short-term. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Short Term has no effect on the direction of Western Asset i.e., Western Asset and Vanguard Short-term go up and down completely randomly.
Pair Corralation between Western Asset and Vanguard Short-term
Assuming the 90 days horizon Western Asset is expected to generate 1.03 times less return on investment than Vanguard Short-term. In addition to that, Western Asset is 1.27 times more volatile than Vanguard Short Term Bond. It trades about 0.06 of its total potential returns per unit of risk. Vanguard Short Term Bond is currently generating about 0.07 per unit of volatility. If you would invest 956.00 in Vanguard Short Term Bond on August 24, 2024 and sell it today you would earn a total of 56.00 from holding Vanguard Short Term Bond or generate 5.86% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Western Asset Pennsylvania vs. Vanguard Short Term Bond
Performance |
| Timeline |
| Western Asset Pennsy |
| Vanguard Short Term |
Western Asset and Vanguard Short-term Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Asset and Vanguard Short-term
The main advantage of trading using opposite Western Asset and Vanguard Short-term positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Asset position performs unexpectedly, Vanguard Short-term 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 Vanguard Short-term will offset losses from the drop in Vanguard Short-term's long position.| Western Asset vs. Vanguard Pennsylvania Long Term | Western Asset vs. Vanguard Pennsylvania Long Term | Western Asset vs. Franklin Pennsylvania Tax Free | Western Asset vs. Franklin Pennsylvania Tax Free |
| Vanguard Short-term vs. Archer Balanced Fund | Vanguard Short-term vs. Volumetric Fund Volumetric | Vanguard Short-term vs. Small Cap Stock | Vanguard Short-term vs. Western Asset Pennsylvania |
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 Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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