Correlation Between Vanguard Total and Western Asset
Can any of the company-specific risk be diversified away by investing in both Vanguard Total 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 Vanguard Total and Western Asset into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Total International and Western Asset Diversified, you can compare the effects of market volatilities on Vanguard Total 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 Vanguard Total with a short position of Western Asset. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Total and Western Asset.
Diversification Opportunities for Vanguard Total and Western Asset
0.3 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Vanguard and Western is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Total International and Western Asset Diversified in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Asset Diversified and Vanguard Total 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 Vanguard Total International 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 Diversified has no effect on the direction of Vanguard Total i.e., Vanguard Total and Western Asset go up and down completely randomly.
Pair Corralation between Vanguard Total and Western Asset
Assuming the 90 days horizon Vanguard Total International is expected to generate 0.64 times more return on investment than Western Asset. However, Vanguard Total International is 1.56 times less risky than Western Asset. It trades about 0.27 of its potential returns per unit of risk. Western Asset Diversified is currently generating about 0.05 per unit of risk. If you would invest 2,678 in Vanguard Total International on August 31, 2024 and sell it today you would earn a total of 29.00 from holding Vanguard Total International or generate 1.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Total International vs. Western Asset Diversified
Performance |
| Timeline |
| Vanguard Total Inter |
| Western Asset Diversified |
Vanguard Total and Western Asset Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Total and Western Asset
The main advantage of trading using opposite Vanguard Total and Western Asset positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Total 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.| Vanguard Total vs. Western Asset Diversified | Vanguard Total vs. Pgim Jennison Diversified | Vanguard Total vs. Adams Diversified Equity | Vanguard Total vs. Harbor Diversified International |
| Western Asset vs. Davis Financial Fund | Western Asset vs. Prudential Jennison Financial | Western Asset vs. Mesirow Financial Small | Western Asset vs. Fidelity Advisor Financial |
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 Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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