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 Total, 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
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between PRFHX and Western is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding T Rowe Price and Western Asset Total in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Asset Total 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 Total 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 1.03 times more return on investment than Western Asset. However, T Rowe is 1.03 times more volatile than Western Asset Total. It trades about 0.09 of its potential returns per unit of risk. Western Asset Total is currently generating about 0.07 per unit of risk. If you would invest 1,015 in T Rowe Price on August 24, 2024 and sell it today you would earn a total of 109.00 from holding T Rowe Price or generate 10.74% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
T Rowe Price vs. Western Asset Total
Performance |
| Timeline |
| T Rowe Price |
| Western Asset Total |
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.| T Rowe vs. T Rowe Price | T Rowe vs. Semiconductor Ultrasector Profund | T Rowe vs. L Abbett Fundamental | T Rowe vs. Eic Value Fund |
| Western Asset vs. Franklin High Yield | Western Asset vs. Ab Impact Municipal | Western Asset vs. Dws Government Money | Western Asset 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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