Correlation Between Income Stock and Western Asset
Can any of the company-specific risk be diversified away by investing in both Income Stock 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 Income Stock and Western Asset into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Income Stock Fund and Western Asset High, you can compare the effects of market volatilities on Income Stock 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 Income Stock with a short position of Western Asset. Check out your portfolio center. Please also check ongoing floating volatility patterns of Income Stock and Western Asset.
Diversification Opportunities for Income Stock and Western Asset
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Income and Western is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Income Stock Fund and Western Asset High in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Asset High and Income Stock 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 Income Stock Fund 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 High has no effect on the direction of Income Stock i.e., Income Stock and Western Asset go up and down completely randomly.
Pair Corralation between Income Stock and Western Asset
Assuming the 90 days horizon Income Stock Fund is expected to generate 5.66 times more return on investment than Western Asset. However, Income Stock is 5.66 times more volatile than Western Asset High. It trades about 0.32 of its potential returns per unit of risk. Western Asset High is currently generating about 0.15 per unit of risk. If you would invest 2,080 in Income Stock Fund on September 4, 2024 and sell it today you would earn a total of 112.00 from holding Income Stock Fund or generate 5.38% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.24% |
| Values | Daily Returns |
Income Stock Fund vs. Western Asset High
Performance |
| Timeline |
| Income Stock |
| Western Asset High |
Income Stock and Western Asset Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Income Stock and Western Asset
The main advantage of trading using opposite Income Stock and Western Asset positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Income Stock 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.| Income Stock vs. Capital Growth Fund | Income Stock vs. Emerging Markets Fund | Income Stock vs. High Income Fund | Income Stock vs. International Fund International |
| Western Asset vs. Clearbridge Aggressive Growth | Western Asset vs. Clearbridge Small Cap | Western Asset vs. Qs International Equity | Western Asset vs. Clearbridge Appreciation Fund |
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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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