Correlation Between Western Asset and Vanguard Wellington
Can any of the company-specific risk be diversified away by investing in both Western Asset and Vanguard Wellington 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 Vanguard Wellington 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 Vanguard Wellington Fund, you can compare the effects of market volatilities on Western Asset and Vanguard Wellington 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 Vanguard Wellington. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Asset and Vanguard Wellington.
Diversification Opportunities for Western Asset and Vanguard Wellington
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Western and Vanguard is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset Premier and Vanguard Wellington Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Wellington 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 Vanguard Wellington. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Wellington has no effect on the direction of Western Asset i.e., Western Asset and Vanguard Wellington go up and down completely randomly.
Pair Corralation between Western Asset and Vanguard Wellington
Assuming the 90 days horizon Western Asset is expected to generate 4.69 times less return on investment than Vanguard Wellington. But when comparing it to its historical volatility, Western Asset Premier is 4.41 times less risky than Vanguard Wellington. It trades about 0.13 of its potential returns per unit of risk. Vanguard Wellington Fund is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 7,444 in Vanguard Wellington Fund on August 29, 2024 and sell it today you would earn a total of 732.00 from holding Vanguard Wellington Fund or generate 9.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.21% |
| Values | Daily Returns |
Western Asset Premier vs. Vanguard Wellington Fund
Performance |
| Timeline |
| Western Asset Premier |
| Vanguard Wellington |
Western Asset and Vanguard Wellington Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Asset and Vanguard Wellington
The main advantage of trading using opposite Western Asset and Vanguard Wellington positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Asset position performs unexpectedly, Vanguard Wellington 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 Vanguard Wellington will offset losses from the drop in Vanguard Wellington's long position.| Western Asset vs. Angel Oak Multi Strategy | Western Asset vs. T Rowe Price | Western Asset vs. Dodge Cox Emerging | Western Asset vs. T Rowe Price |
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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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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