Correlation Between Western Asset and New Economy
Can any of the company-specific risk be diversified away by investing in both Western Asset and New Economy 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 New Economy 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 New Economy Fund, you can compare the effects of market volatilities on Western Asset and New Economy 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 New Economy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Asset and New Economy.
Diversification Opportunities for Western Asset and New Economy
-0.48 | Correlation Coefficient |
Very good diversification
The 3 months correlation between WESTERN and New is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset Inflation and New Economy Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Economy Fund 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 New Economy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Economy Fund has no effect on the direction of Western Asset i.e., Western Asset and New Economy go up and down completely randomly.
Pair Corralation between Western Asset and New Economy
Assuming the 90 days horizon Western Asset Inflation is expected to under-perform the New Economy. But the mutual fund apears to be less risky and, when comparing its historical volatility, Western Asset Inflation is 3.51 times less risky than New Economy. The mutual fund trades about -0.07 of its potential returns per unit of risk. The New Economy Fund is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 6,703 in New Economy Fund on August 27, 2024 and sell it today you would earn a total of 57.00 from holding New Economy Fund or generate 0.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Western Asset Inflation vs. New Economy Fund
Performance |
| Timeline |
| Western Asset Inflation |
| New Economy Fund |
Western Asset and New Economy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Asset and New Economy
The main advantage of trading using opposite Western Asset and New Economy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Asset position performs unexpectedly, New Economy 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 New Economy will offset losses from the drop in New Economy's long position.| Western Asset vs. Invesco Technology Fund | Western Asset vs. Mfs Technology Fund | Western Asset vs. Hennessy Technology Fund | Western Asset vs. Columbia Global Technology |
| New Economy vs. Versatile Bond Portfolio | New Economy vs. T Rowe Price | New Economy vs. Alliancebernstein National Municipal | New Economy vs. Nuveen All American Municipal |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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