Correlation Between Real Return and Western Asset
Can any of the company-specific risk be diversified away by investing in both Real Return 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 Real Return and Western Asset into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Real Return Fund and Western Asset Inflation, you can compare the effects of market volatilities on Real Return 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 Real Return with a short position of Western Asset. Check out your portfolio center. Please also check ongoing floating volatility patterns of Real Return and Western Asset.
Diversification Opportunities for Real Return and Western Asset
0.99 | Correlation Coefficient |
No risk reduction
The 3 months correlation between Real and Western is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Real Return Fund and Western Asset Inflation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Asset Inflation and Real Return 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 Real Return 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 Inflation has no effect on the direction of Real Return i.e., Real Return and Western Asset go up and down completely randomly.
Pair Corralation between Real Return and Western Asset
Assuming the 90 days horizon Real Return Fund is expected to generate 0.89 times more return on investment than Western Asset. However, Real Return Fund is 1.13 times less risky than Western Asset. It trades about -0.1 of its potential returns per unit of risk. Western Asset Inflation is currently generating about -0.12 per unit of risk. If you would invest 1,011 in Real Return Fund on August 24, 2024 and sell it today you would lose (6.00) from holding Real Return Fund or give up 0.59% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Real Return Fund vs. Western Asset Inflation
Performance |
| Timeline |
| Real Return Fund |
| Western Asset Inflation |
Real Return and Western Asset Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Real Return and Western Asset
The main advantage of trading using opposite Real Return and Western Asset positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Real Return 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.| Real Return vs. Lord Abbett Vertible | Real Return vs. Franklin Vertible Securities | Real Return vs. Invesco Vertible Securities | Real Return vs. Rationalpier 88 Convertible |
| Western Asset vs. Vanguard Inflation Protected Securities | Western Asset vs. Vanguard Inflation Protected Securities | Western Asset vs. American Funds Inflation | Western Asset vs. American Funds Inflation |
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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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