Correlation Between Western Asset and Vanguard Intermediate
Can any of the company-specific risk be diversified away by investing in both Western Asset and Vanguard Intermediate 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 Western Asset and Vanguard Intermediate into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Western Asset Intermediate Term and Vanguard Intermediate Term Tax Exempt, you can compare the effects of market volatilities on Western Asset and Vanguard Intermediate 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 Western Asset with a short position of Vanguard Intermediate. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Asset and Vanguard Intermediate.
Diversification Opportunities for Western Asset and Vanguard Intermediate
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Western and Vanguard is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset Intermediate Ter and Vanguard Intermediate Term Tax in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Intermediate and Western Asset 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 Western Asset Intermediate Term are associated (or correlated) with Vanguard Intermediate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Intermediate has no effect on the direction of Western Asset i.e., Western Asset and Vanguard Intermediate go up and down completely randomly.
Pair Corralation between Western Asset and Vanguard Intermediate
Assuming the 90 days horizon Western Asset is expected to generate 1.74 times less return on investment than Vanguard Intermediate. In addition to that, Western Asset is 1.11 times more volatile than Vanguard Intermediate Term Tax Exempt. It trades about 0.05 of its total potential returns per unit of risk. Vanguard Intermediate Term Tax Exempt is currently generating about 0.09 per unit of volatility. If you would invest 1,364 in Vanguard Intermediate Term Tax Exempt on September 13, 2024 and sell it today you would earn a total of 12.00 from holding Vanguard Intermediate Term Tax Exempt or generate 0.88% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Western Asset Intermediate Ter vs. Vanguard Intermediate Term Tax
Performance |
| Timeline |
| Western Asset Interm |
| Vanguard Intermediate |
Western Asset and Vanguard Intermediate Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Asset and Vanguard Intermediate
The main advantage of trading using opposite Western Asset and Vanguard Intermediate positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Asset position performs unexpectedly, Vanguard Intermediate 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 Vanguard Intermediate will offset losses from the drop in Vanguard Intermediate's long position.| Western Asset vs. Prudential High Yield | Western Asset vs. Blackrock High Yield | Western Asset vs. Gmo High Yield | Western Asset vs. Siit High Yield |
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 Managers module to screen money managers from public funds and ETFs managed around the world.
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