Correlation Between Western Asset and Morningstar Total
Can any of the company-specific risk be diversified away by investing in both Western Asset and Morningstar Total 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 Morningstar Total into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Western Asset High and Morningstar Total Return, you can compare the effects of market volatilities on Western Asset and Morningstar Total 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 Morningstar Total. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Asset and Morningstar Total.
Diversification Opportunities for Western Asset and Morningstar Total
-0.43 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Western and Morningstar is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset High and Morningstar Total Return in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Morningstar Total Return 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 High are associated (or correlated) with Morningstar Total. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Morningstar Total Return has no effect on the direction of Western Asset i.e., Western Asset and Morningstar Total go up and down completely randomly.
Pair Corralation between Western Asset and Morningstar Total
Assuming the 90 days horizon Western Asset High is expected to generate 0.81 times more return on investment than Morningstar Total. However, Western Asset High is 1.24 times less risky than Morningstar Total. It trades about 0.11 of its potential returns per unit of risk. Morningstar Total Return is currently generating about 0.03 per unit of risk. If you would invest 588.00 in Western Asset High on August 30, 2024 and sell it today you would earn a total of 119.00 from holding Western Asset High or generate 20.24% 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 High vs. Morningstar Total Return
Performance |
| Timeline |
| Western Asset High |
| Morningstar Total Return |
Western Asset and Morningstar Total Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Asset and Morningstar Total
The main advantage of trading using opposite Western Asset and Morningstar Total positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Asset position performs unexpectedly, Morningstar Total 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 Morningstar Total will offset losses from the drop in Morningstar Total's long position.| Western Asset vs. Prudential High Yield | Western Asset vs. HUMANA INC | Western Asset vs. Aquagold International | Western Asset vs. Barloworld Ltd ADR |
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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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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