Correlation Between Multisector Bond and Western Asset
Can any of the company-specific risk be diversified away by investing in both Multisector Bond 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 Multisector Bond and Western Asset into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Multisector Bond Sma and Western Asset Municipal, you can compare the effects of market volatilities on Multisector Bond 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 Multisector Bond with a short position of Western Asset. Check out your portfolio center. Please also check ongoing floating volatility patterns of Multisector Bond and Western Asset.
Diversification Opportunities for Multisector Bond and Western Asset
0.33 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Multisector and Western is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Multisector Bond Sma and Western Asset Municipal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Asset Municipal and Multisector Bond 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 Multisector Bond Sma 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 Municipal has no effect on the direction of Multisector Bond i.e., Multisector Bond and Western Asset go up and down completely randomly.
Pair Corralation between Multisector Bond and Western Asset
Assuming the 90 days horizon Multisector Bond Sma is expected to generate 0.85 times more return on investment than Western Asset. However, Multisector Bond Sma is 1.17 times less risky than Western Asset. It trades about 0.26 of its potential returns per unit of risk. Western Asset Municipal is currently generating about 0.14 per unit of risk. If you would invest 1,358 in Multisector Bond Sma on November 25, 2024 and sell it today you would earn a total of 15.00 from holding Multisector Bond Sma or generate 1.1% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Multisector Bond Sma vs. Western Asset Municipal
Performance |
Timeline |
Multisector Bond Sma |
Western Asset Municipal |
Multisector Bond and Western Asset Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Multisector Bond and Western Asset
The main advantage of trading using opposite Multisector Bond and Western Asset positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Multisector Bond 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.Multisector Bond vs. Fidelity Flex Servative | ||
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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 Transaction History module to view history of all your transactions and understand their impact on performance.
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