Correlation Between Western Asset and Industrials Portfolio
Can any of the company-specific risk be diversified away by investing in both Western Asset and Industrials Portfolio 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 Western Asset and Industrials Portfolio into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Western Asset Premier and Industrials Portfolio Industrials, you can compare the effects of market volatilities on Western Asset and Industrials Portfolio 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 Western Asset with a short position of Industrials Portfolio. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Asset and Industrials Portfolio.
Diversification Opportunities for Western Asset and Industrials Portfolio
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Western and Industrials is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset Premier and Industrials Portfolio Industri in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Industrials Portfolio and Western Asset 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 Western Asset Premier are associated (or correlated) with Industrials Portfolio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Industrials Portfolio has no effect on the direction of Western Asset i.e., Western Asset and Industrials Portfolio go up and down completely randomly.
Pair Corralation between Western Asset and Industrials Portfolio
Assuming the 90 days horizon Western Asset is expected to generate 6.3 times less return on investment than Industrials Portfolio. But when comparing it to its historical volatility, Western Asset Premier is 7.77 times less risky than Industrials Portfolio. It trades about 0.14 of its potential returns per unit of risk. Industrials Portfolio Industrials is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 3,331 in Industrials Portfolio Industrials on August 26, 2024 and sell it today you would earn a total of 1,205 from holding Industrials Portfolio Industrials or generate 36.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Western Asset Premier vs. Industrials Portfolio Industri
Performance |
| Timeline |
| Western Asset Premier |
| Industrials Portfolio |
Western Asset and Industrials Portfolio Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Asset and Industrials Portfolio
The main advantage of trading using opposite Western Asset and Industrials Portfolio positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Asset position performs unexpectedly, Industrials Portfolio 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 Industrials Portfolio will offset losses from the drop in Industrials Portfolio's long position.| 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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