Correlation Between Sit Tax and Western Asset
Can any of the company-specific risk be diversified away by investing in both Sit Tax 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 Sit Tax and Western Asset into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sit Tax Free Income and Western Asset Municipal, you can compare the effects of market volatilities on Sit Tax 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 Sit Tax with a short position of Western Asset. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sit Tax and Western Asset.
Diversification Opportunities for Sit Tax and Western Asset
0.38 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Sit and Western is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Sit Tax Free Income and Western Asset Municipal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Asset Municipal and Sit Tax 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 Sit Tax Free Income 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 Municipal has no effect on the direction of Sit Tax i.e., Sit Tax and Western Asset go up and down completely randomly.
Pair Corralation between Sit Tax and Western Asset
Assuming the 90 days horizon Sit Tax Free Income is expected to generate 0.69 times more return on investment than Western Asset. However, Sit Tax Free Income is 1.45 times less risky than Western Asset. It trades about 0.49 of its potential returns per unit of risk. Western Asset Municipal is currently generating about 0.23 per unit of risk. If you would invest 876.00 in Sit Tax Free Income on September 13, 2024 and sell it today you would earn a total of 13.00 from holding Sit Tax Free Income or generate 1.48% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Sit Tax Free Income vs. Western Asset Municipal
Performance |
| Timeline |
| Sit Tax Free |
| Western Asset Municipal |
Sit Tax and Western Asset Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sit Tax and Western Asset
The main advantage of trading using opposite Sit Tax and Western Asset positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sit Tax 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.| Sit Tax vs. Sit Small Cap | Sit Tax vs. Sit Global Dividend | Sit Tax vs. Sit Global Dividend | Sit Tax vs. Sit Small Cap |
| Western Asset vs. Vanguard Total Stock | Western Asset vs. Vanguard 500 Index | Western Asset vs. Vanguard Total Stock | Western Asset vs. Vanguard Total Stock |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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