Correlation Between Intermediate-term and Western Asset
Can any of the company-specific risk be diversified away by investing in both Intermediate-term 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 Intermediate-term and Western Asset into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Intermediate Term Tax Free Bond and Western Asset Municipal, you can compare the effects of market volatilities on Intermediate-term 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 Intermediate-term with a short position of Western Asset. Check out your portfolio center. Please also check ongoing floating volatility patterns of Intermediate-term and Western Asset.
Diversification Opportunities for Intermediate-term and Western Asset
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Intermediate-term and Western is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Intermediate Term Tax Free Bon 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 Intermediate-term 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 Intermediate Term Tax Free Bond 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 Intermediate-term i.e., Intermediate-term and Western Asset go up and down completely randomly.
Pair Corralation between Intermediate-term and Western Asset
Assuming the 90 days horizon Intermediate Term Tax Free Bond is expected to generate 0.8 times more return on investment than Western Asset. However, Intermediate Term Tax Free Bond is 1.26 times less risky than Western Asset. It trades about 0.11 of its potential returns per unit of risk. Western Asset Municipal is currently generating about 0.07 per unit of risk. If you would invest 1,065 in Intermediate Term Tax Free Bond on October 25, 2024 and sell it today you would earn a total of 4.00 from holding Intermediate Term Tax Free Bond or generate 0.38% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Intermediate Term Tax Free Bon vs. Western Asset Municipal
Performance |
| Timeline |
| Intermediate Term Tax |
| Western Asset Municipal |
Intermediate-term and Western Asset Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Intermediate-term and Western Asset
The main advantage of trading using opposite Intermediate-term and Western Asset positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Intermediate-term 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.| Intermediate-term vs. Ab Global Bond | Intermediate-term vs. Dreyfusstandish Global Fixed | Intermediate-term vs. Qs Global Equity | Intermediate-term vs. Morningstar Global Income |
| Western Asset vs. Inverse Government Long | Western Asset vs. Transamerica Intermediate Muni | Western Asset vs. Intermediate Term Tax Free Bond | Western Asset vs. Old Westbury Municipal |
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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
Other Complementary Tools
| Portfolio Suggestion Get suggestions outside of your existing asset allocation including your own model portfolios | |
| Pattern Recognition Use different Pattern Recognition models to time the market across multiple global exchanges | |
| ETF Categories List of ETF categories grouped based on various criteria, such as the investment strategy or type of investments | |
| Portfolio Anywhere Track or share privately all of your investments from the convenience of any device | |
| Performance Analysis Check effects of mean-variance optimization against your current asset allocation |