Correlation Between Short-term Fund and Western Asset
Can any of the company-specific risk be diversified away by investing in both Short-term Fund 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 Short-term Fund and Western Asset into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Short Term Fund A and Western Asset Adjustable, you can compare the effects of market volatilities on Short-term Fund 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 Short-term Fund with a short position of Western Asset. Check out your portfolio center. Please also check ongoing floating volatility patterns of Short-term Fund and Western Asset.
Diversification Opportunities for Short-term Fund and Western Asset
0.97 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Short-term and Western is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Short Term Fund A and Western Asset Adjustable in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Asset Adjustable and Short-term Fund 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 Short Term Fund A 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 Adjustable has no effect on the direction of Short-term Fund i.e., Short-term Fund and Western Asset go up and down completely randomly.
Pair Corralation between Short-term Fund and Western Asset
Assuming the 90 days horizon Short-term Fund is expected to generate 1.03 times less return on investment than Western Asset. In addition to that, Short-term Fund is 1.13 times more volatile than Western Asset Adjustable. It trades about 0.22 of its total potential returns per unit of risk. Western Asset Adjustable is currently generating about 0.26 per unit of volatility. If you would invest 868.00 in Western Asset Adjustable on December 11, 2024 and sell it today you would earn a total of 51.00 from holding Western Asset Adjustable or generate 5.88% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Short Term Fund A vs. Western Asset Adjustable
Performance |
| Timeline |
| Short Term Fund |
| Western Asset Adjustable |
Short-term Fund and Western Asset Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Short-term Fund and Western Asset
The main advantage of trading using opposite Short-term Fund and Western Asset positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Short-term Fund 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.| Short-term Fund vs. Putnam Global Health | ||
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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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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