Correlation Between Western Asset and Bank of New York
Can any of the company-specific risk be diversified away by investing in both Western Asset and Bank of New York 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 Bank of New York into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Western Asset Municipal and Bank of New, you can compare the effects of market volatilities on Western Asset and Bank of New York 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 Bank of New York. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Asset and Bank of New York.
Diversification Opportunities for Western Asset and Bank of New York
-0.2 | Correlation Coefficient |
Good diversification
The 3 months correlation between Western and Bank is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset Municipal and Bank of New in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank of New York 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 Municipal are associated (or correlated) with Bank of New York. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank of New York has no effect on the direction of Western Asset i.e., Western Asset and Bank of New York go up and down completely randomly.
Pair Corralation between Western Asset and Bank of New York
Considering the 90-day investment horizon Western Asset is expected to generate 2.35 times less return on investment than Bank of New York. But when comparing it to its historical volatility, Western Asset Municipal is 1.97 times less risky than Bank of New York. It trades about 0.17 of its potential returns per unit of risk. Bank of New is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest 7,651 in Bank of New on August 27, 2024 and sell it today you would earn a total of 363.00 from holding Bank of New or generate 4.74% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Western Asset Municipal vs. Bank of New
Performance |
| Timeline |
| Western Asset Municipal |
| Bank of New York |
Western Asset and Bank of New York Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Asset and Bank of New York
The main advantage of trading using opposite Western Asset and Bank of New York positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Asset position performs unexpectedly, Bank of New York 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 Bank of New York will offset losses from the drop in Bank of New York's long position.| Western Asset vs. Western Asset Managed | Western Asset vs. Blackrock Muniholdings Quality | Western Asset vs. DTF Tax Free | Western Asset vs. John Hancock Income |
| Bank of New York vs. Northern Trust | Bank of New York vs. Invesco Plc | Bank of New York vs. Franklin Resources | Bank of New York vs. T Rowe Price |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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