Correlation Between Western Asset and Diversified Municipal
Can any of the company-specific risk be diversified away by investing in both Western Asset and Diversified Municipal 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 Diversified Municipal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Western Asset Managed and Diversified Municipal Portfolio, you can compare the effects of market volatilities on Western Asset and Diversified Municipal 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 Diversified Municipal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Asset and Diversified Municipal.
Diversification Opportunities for Western Asset and Diversified Municipal
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Western and Diversified is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset Managed and Diversified Municipal Portfoli in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Diversified Municipal 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 Managed are associated (or correlated) with Diversified Municipal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Diversified Municipal has no effect on the direction of Western Asset i.e., Western Asset and Diversified Municipal go up and down completely randomly.
Pair Corralation between Western Asset and Diversified Municipal
Assuming the 90 days horizon Western Asset Managed is expected to generate 1.78 times more return on investment than Diversified Municipal. However, Western Asset is 1.78 times more volatile than Diversified Municipal Portfolio. It trades about -0.02 of its potential returns per unit of risk. Diversified Municipal Portfolio is currently generating about -0.06 per unit of risk. If you would invest 1,520 in Western Asset Managed on September 3, 2024 and sell it today you would lose (4.00) from holding Western Asset Managed or give up 0.26% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Western Asset Managed vs. Diversified Municipal Portfoli
Performance |
| Timeline |
| Western Asset Managed |
| Diversified Municipal |
Western Asset and Diversified Municipal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Asset and Diversified Municipal
The main advantage of trading using opposite Western Asset and Diversified Municipal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Asset position performs unexpectedly, Diversified Municipal 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 Diversified Municipal will offset losses from the drop in Diversified Municipal's long position.| Western Asset vs. Diversified Municipal Portfolio | Western Asset vs. Western Asset Managed | Western Asset vs. Western Asset Managed | Western Asset vs. Nuveen High Yield |
| Diversified Municipal vs. Tax Exempt Bond | Diversified Municipal vs. American High Income Municipal | Diversified Municipal vs. Us Government Securities | Diversified Municipal vs. HUMANA INC |
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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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