Correlation Between Versatile Bond and Western Asset
Can any of the company-specific risk be diversified away by investing in both Versatile Bond 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 Versatile Bond and Western Asset into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Versatile Bond Portfolio and Western Asset Total, you can compare the effects of market volatilities on Versatile Bond 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 Versatile Bond with a short position of Western Asset. Check out your portfolio center. Please also check ongoing floating volatility patterns of Versatile Bond and Western Asset.
Diversification Opportunities for Versatile Bond and Western Asset
0.45 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Versatile and Western is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Versatile Bond Portfolio 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 Versatile Bond 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 Versatile Bond Portfolio 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 Versatile Bond i.e., Versatile Bond and Western Asset go up and down completely randomly.
Pair Corralation between Versatile Bond and Western Asset
Assuming the 90 days horizon Versatile Bond Portfolio is expected to generate 0.5 times more return on investment than Western Asset. However, Versatile Bond Portfolio is 2.0 times less risky than Western Asset. It trades about 0.14 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 5,864 in Versatile Bond Portfolio on September 4, 2024 and sell it today you would earn a total of 606.00 from holding Versatile Bond Portfolio or generate 10.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Versatile Bond Portfolio vs. Western Asset Total
Performance |
| Timeline |
| Versatile Bond Portfolio |
| Western Asset Total |
Versatile Bond and Western Asset Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Versatile Bond and Western Asset
The main advantage of trading using opposite Versatile Bond and Western Asset positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Versatile Bond 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.| Versatile Bond vs. Permanent Portfolio Class | Versatile Bond vs. Permanent Portfolio Class | Versatile Bond vs. Permanent Portfolio Class | Versatile Bond vs. Short Term Treasury Portfolio |
| Western Asset vs. Franklin Mutual Beacon | Western Asset vs. Templeton Developing Markets | Western Asset vs. Franklin Mutual Global | Western Asset vs. Franklin Mutual Global |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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