Correlation Between T Rowe and Western Asset
Can any of the company-specific risk be diversified away by investing in both T Rowe 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 T Rowe and Western Asset into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between T Rowe Price and Western Asset E, you can compare the effects of market volatilities on T Rowe 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 T Rowe with a short position of Western Asset. Check out your portfolio center. Please also check ongoing floating volatility patterns of T Rowe and Western Asset.
Diversification Opportunities for T Rowe and Western Asset
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between PATFX and Western is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding T Rowe Price and Western Asset E in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Asset E and T Rowe 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 T Rowe Price 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 E has no effect on the direction of T Rowe i.e., T Rowe and Western Asset go up and down completely randomly.
Pair Corralation between T Rowe and Western Asset
Assuming the 90 days horizon T Rowe Price is expected to generate 0.92 times more return on investment than Western Asset. However, T Rowe Price is 1.09 times less risky than Western Asset. It trades about 0.14 of its potential returns per unit of risk. Western Asset E is currently generating about 0.12 per unit of risk. If you would invest 1,127 in T Rowe Price on September 1, 2024 and sell it today you would earn a total of 12.00 from holding T Rowe Price or generate 1.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
T Rowe Price vs. Western Asset E
Performance |
| Timeline |
| T Rowe Price |
| Western Asset E |
T Rowe and Western Asset Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with T Rowe and Western Asset
The main advantage of trading using opposite T Rowe and Western Asset positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if T Rowe 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.The idea behind T Rowe Price and Western Asset E pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Western Asset vs. Franklin High Income | Western Asset vs. T Rowe Price | Western Asset vs. Ab Global Risk | Western Asset vs. Federated Institutional High |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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