Correlation Between International Value and Western Asset
Can any of the company-specific risk be diversified away by investing in both International Value 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 International Value and Western Asset into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between International Value Fund and Western Asset Municipal, you can compare the effects of market volatilities on International Value 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 International Value with a short position of Western Asset. Check out your portfolio center. Please also check ongoing floating volatility patterns of International Value and Western Asset.
Diversification Opportunities for International Value and Western Asset
0.59 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between International and Western is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding International Value Fund 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 International Value 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 International Value 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 Municipal has no effect on the direction of International Value i.e., International Value and Western Asset go up and down completely randomly.
Pair Corralation between International Value and Western Asset
Assuming the 90 days horizon International Value Fund is expected to under-perform the Western Asset. In addition to that, International Value is 3.26 times more volatile than Western Asset Municipal. It trades about -0.02 of its total potential returns per unit of risk. Western Asset Municipal is currently generating about 0.23 per unit of volatility. If you would invest 726.00 in Western Asset Municipal on September 12, 2024 and sell it today you would earn a total of 7.00 from holding Western Asset Municipal or generate 0.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
International Value Fund vs. Western Asset Municipal
Performance |
| Timeline |
| International Value |
| Western Asset Municipal |
International Value and Western Asset Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with International Value and Western Asset
The main advantage of trading using opposite International Value and Western Asset positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if International Value 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.| International Value vs. Prudential High Yield | International Value vs. Strategic Advisers Income | International Value vs. Gmo High Yield | International Value vs. T Rowe Price |
| Western Asset vs. Barings Active Short | Western Asset vs. Cmg Ultra Short | Western Asset vs. Blackrock Short Term Inflat Protected | Western Asset vs. Rbc Short Duration |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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