Correlation Between Western Asset and Pro Blend
Can any of the company-specific risk be diversified away by investing in both Western Asset and Pro Blend 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 Pro Blend 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 Pro Blend Maximum Term, you can compare the effects of market volatilities on Western Asset and Pro Blend 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 Pro Blend. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Asset and Pro Blend.
Diversification Opportunities for Western Asset and Pro Blend
-0.3 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Western and Pro is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset Inflation and Pro Blend Maximum Term in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pro Blend Maximum 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 Pro Blend. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pro Blend Maximum has no effect on the direction of Western Asset i.e., Western Asset and Pro Blend go up and down completely randomly.
Pair Corralation between Western Asset and Pro Blend
Assuming the 90 days horizon Western Asset is expected to generate 4.66 times less return on investment than Pro Blend. But when comparing it to its historical volatility, Western Asset Inflation is 2.08 times less risky than Pro Blend. It trades about 0.03 of its potential returns per unit of risk. Pro Blend Maximum Term is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 2,360 in Pro Blend Maximum Term on September 14, 2024 and sell it today you would earn a total of 237.00 from holding Pro Blend Maximum Term or generate 10.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Western Asset Inflation vs. Pro Blend Maximum Term
Performance |
| Timeline |
| Western Asset Inflation |
| Pro Blend Maximum |
Western Asset and Pro Blend Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Asset and Pro Blend
The main advantage of trading using opposite Western Asset and Pro Blend positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Asset position performs unexpectedly, Pro Blend 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 Pro Blend will offset losses from the drop in Pro Blend's long position.| Western Asset vs. Goldman Sachs Clean | Western Asset vs. Short Precious Metals | Western Asset vs. Gold And Precious | Western Asset vs. Fidelity Advisor Gold |
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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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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