Correlation Between Western Asset and Great-west
Can any of the company-specific risk be diversified away by investing in both Western Asset and Great-west 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 Great-west 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 Great West T Rowe, you can compare the effects of market volatilities on Western Asset and Great-west 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 Great-west. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Asset and Great-west.
Diversification Opportunities for Western Asset and Great-west
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Western and Great-west is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset High and Great West T Rowe in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Great West T 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 Great-west. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Great West T has no effect on the direction of Western Asset i.e., Western Asset and Great-west go up and down completely randomly.
Pair Corralation between Western Asset and Great-west
Assuming the 90 days horizon Western Asset is expected to generate 1.85 times less return on investment than Great-west. But when comparing it to its historical volatility, Western Asset High is 4.28 times less risky than Great-west. It trades about 0.23 of its potential returns per unit of risk. Great West T Rowe is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 3,688 in Great West T Rowe on August 31, 2024 and sell it today you would earn a total of 407.00 from holding Great West T Rowe or generate 11.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.21% |
| Values | Daily Returns |
Western Asset High vs. Great West T Rowe
Performance |
| Timeline |
| Western Asset High |
| Great West T |
Western Asset and Great-west Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Asset and Great-west
The main advantage of trading using opposite Western Asset and Great-west positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Asset position performs unexpectedly, Great-west 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 Great-west will offset losses from the drop in Great-west's long position.| Western Asset vs. Vanguard High Yield Corporate | Western Asset vs. Vanguard High Yield Porate | Western Asset vs. Blackrock Hi Yld | Western Asset vs. Blackrock High Yield |
| Great-west vs. Western Asset High | Great-west vs. Aqr Risk Balanced Modities | Great-west vs. Pace High Yield | Great-west vs. Needham Aggressive Growth |
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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.
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