Correlation Between Us Small and Western Asset
Can any of the company-specific risk be diversified away by investing in both Us Small 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 Us Small and Western Asset into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Us Small Cap and Western Asset Porate, you can compare the effects of market volatilities on Us Small 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 Us Small with a short position of Western Asset. Check out your portfolio center. Please also check ongoing floating volatility patterns of Us Small and Western Asset.
Diversification Opportunities for Us Small and Western Asset
-0.47 | Correlation Coefficient |
Very good diversification
The 3 months correlation between RLESX and Western is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Us Small Cap and Western Asset Porate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Asset Porate and Us Small 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 Us Small Cap 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 Porate has no effect on the direction of Us Small i.e., Us Small and Western Asset go up and down completely randomly.
Pair Corralation between Us Small and Western Asset
Assuming the 90 days horizon Us Small Cap is expected to under-perform the Western Asset. In addition to that, Us Small is 2.85 times more volatile than Western Asset Porate. It trades about -0.09 of its total potential returns per unit of risk. Western Asset Porate is currently generating about 0.07 per unit of volatility. If you would invest 1,068 in Western Asset Porate on September 12, 2024 and sell it today you would earn a total of 5.00 from holding Western Asset Porate or generate 0.47% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Us Small Cap vs. Western Asset Porate
Performance |
| Timeline |
| Us Small Cap |
| Western Asset Porate |
Us Small and Western Asset Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Us Small and Western Asset
The main advantage of trading using opposite Us Small and Western Asset positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Us Small 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.| Us Small vs. California Bond Fund | Us Small vs. Blrc Sgy Mnp | Us Small vs. Franklin High Yield | Us Small vs. Doubleline Yield Opportunities |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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