Correlation Between Western Asset and Vanguard Inflation-protec
Can any of the company-specific risk be diversified away by investing in both Western Asset and Vanguard Inflation-protec 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 Vanguard Inflation-protec 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 Vanguard Inflation Protected Securities, you can compare the effects of market volatilities on Western Asset and Vanguard Inflation-protec 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 Vanguard Inflation-protec. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Asset and Vanguard Inflation-protec.
Diversification Opportunities for Western Asset and Vanguard Inflation-protec
0.99 | Correlation Coefficient |
No risk reduction
The 3 months correlation between Western and Vanguard is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset Inflation and Vanguard Inflation Protected S in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Inflation-protec 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 Vanguard Inflation-protec. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Inflation-protec has no effect on the direction of Western Asset i.e., Western Asset and Vanguard Inflation-protec go up and down completely randomly.
Pair Corralation between Western Asset and Vanguard Inflation-protec
Assuming the 90 days horizon Western Asset is expected to generate 1.17 times less return on investment than Vanguard Inflation-protec. But when comparing it to its historical volatility, Western Asset Inflation is 1.09 times less risky than Vanguard Inflation-protec. It trades about 0.27 of its potential returns per unit of risk. Vanguard Inflation Protected Securities is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest 1,161 in Vanguard Inflation Protected Securities on November 29, 2024 and sell it today you would earn a total of 19.00 from holding Vanguard Inflation Protected Securities or generate 1.64% 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. Vanguard Inflation Protected S
Performance |
| Timeline |
| Western Asset Inflation |
| Vanguard Inflation-protec |
Western Asset and Vanguard Inflation-protec Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Asset and Vanguard Inflation-protec
The main advantage of trading using opposite Western Asset and Vanguard Inflation-protec positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Asset position performs unexpectedly, Vanguard Inflation-protec 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 Vanguard Inflation-protec will offset losses from the drop in Vanguard Inflation-protec's long position.The idea behind Western Asset Inflation and Vanguard Inflation Protected Securities pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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