Correlation Between Western Asset and New Jersey
Can any of the company-specific risk be diversified away by investing in both Western Asset and New Jersey 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 New Jersey into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Western Asset New and New Jersey Tax Free, you can compare the effects of market volatilities on Western Asset and New Jersey 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 New Jersey. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Asset and New Jersey.
Diversification Opportunities for Western Asset and New Jersey
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Western and New is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset New and New Jersey Tax Free in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Jersey Tax 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 New are associated (or correlated) with New Jersey. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Jersey Tax has no effect on the direction of Western Asset i.e., Western Asset and New Jersey go up and down completely randomly.
Pair Corralation between Western Asset and New Jersey
Assuming the 90 days horizon Western Asset is expected to generate 1.29 times less return on investment than New Jersey. In addition to that, Western Asset is 1.25 times more volatile than New Jersey Tax Free. It trades about 0.3 of its total potential returns per unit of risk. New Jersey Tax Free is currently generating about 0.48 per unit of volatility. If you would invest 1,141 in New Jersey Tax Free on September 13, 2024 and sell it today you would earn a total of 13.00 from holding New Jersey Tax Free or generate 1.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 95.45% |
| Values | Daily Returns |
Western Asset New vs. New Jersey Tax Free
Performance |
| Timeline |
| Western Asset New |
| New Jersey Tax |
Western Asset and New Jersey Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Asset and New Jersey
The main advantage of trading using opposite Western Asset and New Jersey positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Asset position performs unexpectedly, New Jersey 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 New Jersey will offset losses from the drop in New Jersey's long position.| Western Asset vs. Clearbridge Aggressive Growth | Western Asset vs. Clearbridge Small Cap | Western Asset vs. Qs International Equity | Western Asset vs. Clearbridge Appreciation Fund |
| New Jersey vs. New York Tax Free | New Jersey vs. Georgia Tax Free Bond | New Jersey vs. T Rowe Price | New Jersey 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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