Correlation Between Western Asset and DTF Tax
Can any of the company-specific risk be diversified away by investing in both Western Asset and DTF Tax 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 DTF Tax into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Western Asset Managed and DTF Tax Free, you can compare the effects of market volatilities on Western Asset and DTF Tax 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 DTF Tax. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Asset and DTF Tax.
Diversification Opportunities for Western Asset and DTF Tax
0.01 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Western and DTF is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset Managed and DTF Tax Free in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DTF Tax Free 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 Managed are associated (or correlated) with DTF Tax. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DTF Tax Free has no effect on the direction of Western Asset i.e., Western Asset and DTF Tax go up and down completely randomly.
Pair Corralation between Western Asset and DTF Tax
Considering the 90-day investment horizon Western Asset Managed is expected to generate 1.29 times more return on investment than DTF Tax. However, Western Asset is 1.29 times more volatile than DTF Tax Free. It trades about 0.15 of its potential returns per unit of risk. DTF Tax Free is currently generating about 0.11 per unit of risk. If you would invest 1,027 in Western Asset Managed on August 28, 2024 and sell it today you would earn a total of 19.00 from holding Western Asset Managed or generate 1.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Western Asset Managed vs. DTF Tax Free
Performance |
| Timeline |
| Western Asset Managed |
| DTF Tax Free |
Western Asset and DTF Tax Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Asset and DTF Tax
The main advantage of trading using opposite Western Asset and DTF Tax positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Asset position performs unexpectedly, DTF Tax 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 DTF Tax will offset losses from the drop in DTF Tax's long position.| Western Asset vs. Western Asset Municipal | Western Asset vs. Blackrock Muniholdings Quality | Western Asset vs. DTF Tax Free | Western Asset vs. John Hancock Income |
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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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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