Correlation Between Municipal Bond and Western Asset
Can any of the company-specific risk be diversified away by investing in both Municipal Bond 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 Municipal Bond and Western Asset into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Municipal Bond Portfolio and Western Asset High, you can compare the effects of market volatilities on Municipal Bond 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 Municipal Bond with a short position of Western Asset. Check out your portfolio center. Please also check ongoing floating volatility patterns of Municipal Bond and Western Asset.
Diversification Opportunities for Municipal Bond and Western Asset
-0.08 | Correlation Coefficient |
Good diversification
The 3 months correlation between Municipal and Western is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Municipal Bond Portfolio and Western Asset High in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Asset High and Municipal Bond 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 Municipal Bond Portfolio 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 High has no effect on the direction of Municipal Bond i.e., Municipal Bond and Western Asset go up and down completely randomly.
Pair Corralation between Municipal Bond and Western Asset
Assuming the 90 days horizon Municipal Bond is expected to generate 3.44 times less return on investment than Western Asset. But when comparing it to its historical volatility, Municipal Bond Portfolio is 1.38 times less risky than Western Asset. It trades about 0.08 of its potential returns per unit of risk. Western Asset High is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest 660.00 in Western Asset High on September 3, 2024 and sell it today you would earn a total of 48.00 from holding Western Asset High or generate 7.27% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Municipal Bond Portfolio vs. Western Asset High
Performance |
| Timeline |
| Municipal Bond Portfolio |
| Western Asset High |
Municipal Bond and Western Asset Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Municipal Bond and Western Asset
The main advantage of trading using opposite Municipal Bond and Western Asset positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Municipal Bond 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.| Municipal Bond vs. Pace Large Growth | Municipal Bond vs. L Abbett Growth | Municipal Bond vs. Smallcap Growth Fund | Municipal Bond vs. Mid Cap Growth |
| Western Asset vs. Oklahoma College Savings | Western Asset vs. Massmutual Select Diversified | Western Asset vs. Jpmorgan Emerging Markets | Western Asset vs. Locorr Market Trend |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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