Correlation Between Western Asset and Cref Inflation
Can any of the company-specific risk be diversified away by investing in both Western Asset and Cref Inflation 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 Cref Inflation 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 Cref Inflation Linked Bond, you can compare the effects of market volatilities on Western Asset and Cref Inflation 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 Cref Inflation. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Asset and Cref Inflation.
Diversification Opportunities for Western Asset and Cref Inflation
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Western and Cref is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset New and Cref Inflation Linked Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cref Inflation Linked 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 Cref Inflation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cref Inflation Linked has no effect on the direction of Western Asset i.e., Western Asset and Cref Inflation go up and down completely randomly.
Pair Corralation between Western Asset and Cref Inflation
Assuming the 90 days horizon Western Asset New is expected to generate 1.4 times more return on investment than Cref Inflation. However, Western Asset is 1.4 times more volatile than Cref Inflation Linked Bond. It trades about 0.01 of its potential returns per unit of risk. Cref Inflation Linked Bond is currently generating about -0.04 per unit of risk. If you would invest 1,208 in Western Asset New on September 12, 2024 and sell it today you would earn a total of 2.00 from holding Western Asset New or generate 0.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 98.44% |
| Values | Daily Returns |
Western Asset New vs. Cref Inflation Linked Bond
Performance |
| Timeline |
| Western Asset New |
| Cref Inflation Linked |
Western Asset and Cref Inflation Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Asset and Cref Inflation
The main advantage of trading using opposite Western Asset and Cref Inflation positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Asset position performs unexpectedly, Cref Inflation 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 Cref Inflation will offset losses from the drop in Cref Inflation's long position.| 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 |
| Cref Inflation vs. Queens Road Small | Cref Inflation vs. Boston Partners Small | Cref Inflation vs. Valic Company I | Cref Inflation vs. Fpa Queens Road |
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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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