Correlation Between Sp Smallcap and Western Asset
Can any of the company-specific risk be diversified away by investing in both Sp Smallcap 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 Sp Smallcap and Western Asset into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sp Smallcap 600 and Western Asset E, you can compare the effects of market volatilities on Sp Smallcap 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 Sp Smallcap with a short position of Western Asset. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sp Smallcap and Western Asset.
Diversification Opportunities for Sp Smallcap and Western Asset
0.49 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between RYSVX and Western is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Sp Smallcap 600 and Western Asset E in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Asset E and Sp Smallcap 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 Sp Smallcap 600 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 E has no effect on the direction of Sp Smallcap i.e., Sp Smallcap and Western Asset go up and down completely randomly.
Pair Corralation between Sp Smallcap and Western Asset
Assuming the 90 days horizon Sp Smallcap 600 is expected to generate 3.04 times more return on investment than Western Asset. However, Sp Smallcap is 3.04 times more volatile than Western Asset E. It trades about 0.04 of its potential returns per unit of risk. Western Asset E is currently generating about 0.08 per unit of risk. If you would invest 20,742 in Sp Smallcap 600 on October 25, 2024 and sell it today you would earn a total of 150.00 from holding Sp Smallcap 600 or generate 0.72% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sp Smallcap 600 vs. Western Asset E
Performance |
| Timeline |
| Sp Smallcap 600 |
| Western Asset E |
Sp Smallcap and Western Asset Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sp Smallcap and Western Asset
The main advantage of trading using opposite Sp Smallcap and Western Asset positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sp Smallcap 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.| Sp Smallcap vs. Invesco Technology Fund | Sp Smallcap vs. Blackrock Science Technology | Sp Smallcap vs. Columbia Global Technology | Sp Smallcap vs. Dreyfus Technology Growth |
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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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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