Correlation Between Western Asset and Schwab Treasury
Can any of the company-specific risk be diversified away by investing in both Western Asset and Schwab Treasury 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 Schwab Treasury 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 Schwab Treasury Inflation, you can compare the effects of market volatilities on Western Asset and Schwab Treasury 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 Schwab Treasury. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Asset and Schwab Treasury.
Diversification Opportunities for Western Asset and Schwab Treasury
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Western and Schwab is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset Inflation and Schwab Treasury Inflation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Schwab Treasury Inflation 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 Schwab Treasury. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Schwab Treasury Inflation has no effect on the direction of Western Asset i.e., Western Asset and Schwab Treasury go up and down completely randomly.
Pair Corralation between Western Asset and Schwab Treasury
Assuming the 90 days horizon Western Asset is expected to generate 1.12 times less return on investment than Schwab Treasury. In addition to that, Western Asset is 1.15 times more volatile than Schwab Treasury Inflation. It trades about 0.05 of its total potential returns per unit of risk. Schwab Treasury Inflation is currently generating about 0.07 per unit of volatility. If you would invest 959.00 in Schwab Treasury Inflation on September 12, 2024 and sell it today you would earn a total of 73.00 from holding Schwab Treasury Inflation or generate 7.61% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Western Asset Inflation vs. Schwab Treasury Inflation
Performance |
| Timeline |
| Western Asset Inflation |
| Schwab Treasury Inflation |
Western Asset and Schwab Treasury Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Asset and Schwab Treasury
The main advantage of trading using opposite Western Asset and Schwab Treasury positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Asset position performs unexpectedly, Schwab Treasury 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 Schwab Treasury will offset losses from the drop in Schwab Treasury's long position.| Western Asset vs. Eventide Healthcare Life | Western Asset vs. Live Oak Health | Western Asset vs. Alger Health Sciences | Western Asset vs. Prudential Health Sciences |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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