Correlation Between Diversified Municipal and Western Asset
Can any of the company-specific risk be diversified away by investing in both Diversified Municipal 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 Diversified Municipal and Western Asset into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Diversified Municipal Portfolio and Western Asset Managed, you can compare the effects of market volatilities on Diversified Municipal 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 Diversified Municipal with a short position of Western Asset. Check out your portfolio center. Please also check ongoing floating volatility patterns of Diversified Municipal and Western Asset.
Diversification Opportunities for Diversified Municipal and Western Asset
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Diversified and WESTERN is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Diversified Municipal Portfoli and Western Asset Managed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Asset Managed and Diversified Municipal 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 Diversified Municipal 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 Managed has no effect on the direction of Diversified Municipal i.e., Diversified Municipal and Western Asset go up and down completely randomly.
Pair Corralation between Diversified Municipal and Western Asset
Assuming the 90 days horizon Diversified Municipal is expected to generate 1.6 times less return on investment than Western Asset. But when comparing it to its historical volatility, Diversified Municipal Portfolio is 1.89 times less risky than Western Asset. It trades about 0.2 of its potential returns per unit of risk. Western Asset Managed is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 1,497 in Western Asset Managed on September 1, 2024 and sell it today you would earn a total of 19.00 from holding Western Asset Managed or generate 1.27% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Diversified Municipal Portfoli vs. Western Asset Managed
Performance |
| Timeline |
| Diversified Municipal |
| Western Asset Managed |
Diversified Municipal and Western Asset Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Diversified Municipal and Western Asset
The main advantage of trading using opposite Diversified Municipal and Western Asset positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Diversified Municipal 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.| Diversified Municipal vs. Ab Global E | Diversified Municipal vs. Ab Global E | Diversified Municipal vs. Ab Global E | Diversified Municipal vs. Ab Minnesota Portfolio |
| Western Asset vs. Diversified Municipal Portfolio | Western Asset vs. Western Asset Managed | Western Asset vs. Western Asset Managed | Western Asset vs. Nuveen High Yield |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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