Correlation Between Western Asset and T Rowe
Can any of the company-specific risk be diversified away by investing in both Western Asset and T Rowe 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 T Rowe into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Western Asset Mortgage and T Rowe Price, you can compare the effects of market volatilities on Western Asset and T Rowe 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 T Rowe. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Asset and T Rowe.
Diversification Opportunities for Western Asset and T Rowe
-0.63 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Western and TRBUX is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset Mortgage and T Rowe Price in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on T Rowe Price 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 Mortgage are associated (or correlated) with T Rowe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of T Rowe Price has no effect on the direction of Western Asset i.e., Western Asset and T Rowe go up and down completely randomly.
Pair Corralation between Western Asset and T Rowe
Assuming the 90 days horizon Western Asset Mortgage is expected to under-perform the T Rowe. In addition to that, Western Asset is 3.03 times more volatile than T Rowe Price. It trades about -0.05 of its total potential returns per unit of risk. T Rowe Price is currently generating about 0.12 per unit of volatility. If you would invest 503.00 in T Rowe Price on September 2, 2024 and sell it today you would earn a total of 4.00 from holding T Rowe Price or generate 0.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Western Asset Mortgage vs. T Rowe Price
Performance |
| Timeline |
| Western Asset Mortgage |
| T Rowe Price |
Western Asset and T Rowe Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Asset and T Rowe
The main advantage of trading using opposite Western Asset and T Rowe positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Asset position performs unexpectedly, T Rowe 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 T Rowe will offset losses from the drop in T Rowe's long position.| Western Asset vs. Federated Global Allocation | Western Asset vs. T Rowe Price | Western Asset vs. Commonwealth Global Fund | Western Asset vs. Barings Global Floating |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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