Correlation Between Western Asset and Prudential
Can any of the company-specific risk be diversified away by investing in both Western Asset and Prudential 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 Prudential 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 Prudential E Bond, you can compare the effects of market volatilities on Western Asset and Prudential 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 Prudential. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Asset and Prudential.
Diversification Opportunities for Western Asset and Prudential
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Western and Prudential is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset Inflation and Prudential E Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prudential E 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 Prudential. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prudential E Bond has no effect on the direction of Western Asset i.e., Western Asset and Prudential go up and down completely randomly.
Pair Corralation between Western Asset and Prudential
Assuming the 90 days horizon Western Asset is expected to generate 1.63 times less return on investment than Prudential. But when comparing it to its historical volatility, Western Asset Inflation is 1.05 times less risky than Prudential. It trades about 0.03 of its potential returns per unit of risk. Prudential E Bond is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 841.00 in Prudential E Bond on September 14, 2024 and sell it today you would earn a total of 29.00 from holding Prudential E Bond or generate 3.45% 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. Prudential E Bond
Performance |
| Timeline |
| Western Asset Inflation |
| Prudential E Bond |
Western Asset and Prudential Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Asset and Prudential
The main advantage of trading using opposite Western Asset and Prudential positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Asset position performs unexpectedly, Prudential 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 Prudential will offset losses from the drop in Prudential'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 |
| Prudential vs. Precious Metals And | Prudential vs. International Investors Gold | Prudential vs. Gabelli Gold Fund | Prudential vs. Short Precious Metals |
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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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