Correlation Between T Rowe and Western Asset
Can any of the company-specific risk be diversified away by investing in both T Rowe 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 T Rowe and Western Asset into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between T Rowe Price and Western Asset Intermediate, you can compare the effects of market volatilities on T Rowe 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 T Rowe with a short position of Western Asset. Check out your portfolio center. Please also check ongoing floating volatility patterns of T Rowe and Western Asset.
Diversification Opportunities for T Rowe and Western Asset
-0.3 | Correlation Coefficient |
Very good diversification
The 3 months correlation between TRRZX and Western is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding T Rowe Price and Western Asset Intermediate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Asset Interm and T Rowe 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 T Rowe Price 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 Interm has no effect on the direction of T Rowe i.e., T Rowe and Western Asset go up and down completely randomly.
Pair Corralation between T Rowe and Western Asset
Assuming the 90 days horizon T Rowe Price is expected to generate 3.5 times more return on investment than Western Asset. However, T Rowe is 3.5 times more volatile than Western Asset Intermediate. It trades about 0.1 of its potential returns per unit of risk. Western Asset Intermediate is currently generating about 0.07 per unit of risk. If you would invest 1,558 in T Rowe Price on September 3, 2024 and sell it today you would earn a total of 159.00 from holding T Rowe Price or generate 10.21% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
T Rowe Price vs. Western Asset Intermediate
Performance |
| Timeline |
| T Rowe Price |
| Western Asset Interm |
T Rowe and Western Asset Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with T Rowe and Western Asset
The main advantage of trading using opposite T Rowe and Western Asset positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if T Rowe 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.| T Rowe vs. American Funds 2060 | T Rowe vs. American Funds 2060 | T Rowe vs. American Funds 2060 | T Rowe vs. T Rowe Price |
| Western Asset vs. Transamerica Asset Allocation | Western Asset vs. T Rowe Price | Western Asset vs. T Rowe Price | Western Asset vs. Legg Mason Partners |
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 Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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