Correlation Between Western Asset and Absolute Strategies
Can any of the company-specific risk be diversified away by investing in both Western Asset and Absolute Strategies 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 Absolute Strategies into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Western Asset Inflation and Absolute Strategies Fund, you can compare the effects of market volatilities on Western Asset and Absolute Strategies 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 Absolute Strategies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Asset and Absolute Strategies.
Diversification Opportunities for Western Asset and Absolute Strategies
0.59 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Western and Absolute is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset Inflation and Absolute Strategies Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Absolute Strategies 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 Inflation are associated (or correlated) with Absolute Strategies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Absolute Strategies has no effect on the direction of Western Asset i.e., Western Asset and Absolute Strategies go up and down completely randomly.
Pair Corralation between Western Asset and Absolute Strategies
Assuming the 90 days horizon Western Asset Inflation is expected to generate 0.83 times more return on investment than Absolute Strategies. However, Western Asset Inflation is 1.21 times less risky than Absolute Strategies. It trades about 0.06 of its potential returns per unit of risk. Absolute Strategies Fund is currently generating about -0.05 per unit of risk. If you would invest 897.00 in Western Asset Inflation on September 4, 2024 and sell it today you would earn a total of 44.00 from holding Western Asset Inflation or generate 4.91% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 92.28% |
| Values | Daily Returns |
Western Asset Inflation vs. Absolute Strategies Fund
Performance |
| Timeline |
| Western Asset Inflation |
| Absolute Strategies |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Western Asset and Absolute Strategies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Asset and Absolute Strategies
The main advantage of trading using opposite Western Asset and Absolute Strategies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Asset position performs unexpectedly, Absolute Strategies 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 Absolute Strategies will offset losses from the drop in Absolute Strategies' long position.| Western Asset vs. Ab Small Cap | Western Asset vs. Commonwealth Global Fund | Western Asset vs. Growth Strategy Fund | Western Asset vs. T Rowe Price |
| Absolute Strategies vs. Aqr Managed Futures | Absolute Strategies vs. American Funds Inflation | Absolute Strategies vs. Western Asset Inflation | Absolute Strategies vs. Inflation Protected Bond 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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