Correlation Between Global Diversified and Western Asset
Can any of the company-specific risk be diversified away by investing in both Global Diversified 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 Global Diversified and Western Asset into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Global Diversified Income and Western Asset Diversified, you can compare the effects of market volatilities on Global Diversified 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 Global Diversified with a short position of Western Asset. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global Diversified and Western Asset.
Diversification Opportunities for Global Diversified and Western Asset
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Global and Western is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Global Diversified Income and Western Asset Diversified in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Asset Diversified and Global Diversified 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 Global Diversified Income 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 Diversified has no effect on the direction of Global Diversified i.e., Global Diversified and Western Asset go up and down completely randomly.
Pair Corralation between Global Diversified and Western Asset
Assuming the 90 days horizon Global Diversified is expected to generate 3.92 times less return on investment than Western Asset. But when comparing it to its historical volatility, Global Diversified Income is 1.34 times less risky than Western Asset. It trades about 0.02 of its potential returns per unit of risk. Western Asset Diversified is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 1,549 in Western Asset Diversified on September 12, 2024 and sell it today you would earn a total of 5.00 from holding Western Asset Diversified or generate 0.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.45% |
| Values | Daily Returns |
Global Diversified Income vs. Western Asset Diversified
Performance |
| Timeline |
| Global Diversified Income |
| Western Asset Diversified |
Global Diversified and Western Asset Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Global Diversified and Western Asset
The main advantage of trading using opposite Global Diversified and Western Asset positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global Diversified 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.| Global Diversified vs. Pimco Income Fund | Global Diversified vs. Pimco Income Fund | Global Diversified vs. Pimco Incme Fund | Global Diversified vs. Pimco Income Fund |
| Western Asset vs. Vanguard Total Stock | Western Asset vs. Vanguard 500 Index | Western Asset vs. Vanguard Total Stock | Western Asset vs. Vanguard Total Stock |
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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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