Correlation Between Western Asset and Short Duration
Can any of the company-specific risk be diversified away by investing in both Western Asset and Short Duration 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 Short Duration 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 Short Duration Bond, you can compare the effects of market volatilities on Western Asset and Short Duration 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 Short Duration. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Asset and Short Duration.
Diversification Opportunities for Western Asset and Short Duration
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Western and Short is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset Inflation and Short Duration Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Short Duration Bond 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 Short Duration. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Short Duration Bond has no effect on the direction of Western Asset i.e., Western Asset and Short Duration go up and down completely randomly.
Pair Corralation between Western Asset and Short Duration
Assuming the 90 days horizon Western Asset Inflation is expected to generate 3.36 times more return on investment than Short Duration. However, Western Asset is 3.36 times more volatile than Short Duration Bond. It trades about 0.06 of its potential returns per unit of risk. Short Duration Bond is currently generating about 0.19 per unit of risk. If you would invest 937.00 in Western Asset Inflation on September 1, 2024 and sell it today you would earn a total of 4.00 from holding Western Asset Inflation or generate 0.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.45% |
| Values | Daily Returns |
Western Asset Inflation vs. Short Duration Bond
Performance |
| Timeline |
| Western Asset Inflation |
| Short Duration Bond |
Western Asset and Short Duration Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Asset and Short Duration
The main advantage of trading using opposite Western Asset and Short Duration positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Asset position performs unexpectedly, Short Duration 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 Short Duration will offset losses from the drop in Short Duration's long position.| Western Asset vs. Iaadx | Western Asset vs. Abr 7525 Volatility | Western Asset vs. Ab Value Fund | Western Asset vs. Bbh Partner Fund |
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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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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