Correlation Between Cref Inflation and Western Asset
Can any of the company-specific risk be diversified away by investing in both Cref Inflation 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 Cref Inflation and Western Asset into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cref Inflation Linked Bond and Western Asset New, you can compare the effects of market volatilities on Cref Inflation 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 Cref Inflation with a short position of Western Asset. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cref Inflation and Western Asset.
Diversification Opportunities for Cref Inflation and Western Asset
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Cref and Western is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Cref Inflation Linked Bond and Western Asset New in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Asset New and Cref Inflation 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 Cref Inflation Linked Bond 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 New has no effect on the direction of Cref Inflation i.e., Cref Inflation and Western Asset go up and down completely randomly.
Pair Corralation between Cref Inflation and Western Asset
Assuming the 90 days trading horizon Cref Inflation is expected to generate 1.77 times less return on investment than Western Asset. In addition to that, Cref Inflation is 1.17 times more volatile than Western Asset New. It trades about 0.16 of its total potential returns per unit of risk. Western Asset New is currently generating about 0.34 per unit of volatility. If you would invest 1,198 in Western Asset New on September 12, 2024 and sell it today you would earn a total of 12.00 from holding Western Asset New or generate 1.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cref Inflation Linked Bond vs. Western Asset New
Performance |
| Timeline |
| Cref Inflation Linked |
| Western Asset New |
Cref Inflation and Western Asset Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cref Inflation and Western Asset
The main advantage of trading using opposite Cref Inflation and Western Asset positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cref Inflation 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.| Cref Inflation vs. Queens Road Small | Cref Inflation vs. Boston Partners Small | Cref Inflation vs. Valic Company I | Cref Inflation vs. Fpa Queens Road |
| Western Asset vs. New Jersey Tax Free | Western Asset vs. T Rowe Price | Western Asset vs. Virginia Tax Free Bond | 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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