Correlation Between Western Asset and Neuberger Berman
Can any of the company-specific risk be diversified away by investing in both Western Asset and Neuberger Berman 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 Neuberger Berman 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 Neuberger Berman Large, you can compare the effects of market volatilities on Western Asset and Neuberger Berman 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 Neuberger Berman. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Asset and Neuberger Berman.
Diversification Opportunities for Western Asset and Neuberger Berman
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Western and Neuberger is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset High and Neuberger Berman Large in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Neuberger Berman Large 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 Neuberger Berman. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Neuberger Berman Large has no effect on the direction of Western Asset i.e., Western Asset and Neuberger Berman go up and down completely randomly.
Pair Corralation between Western Asset and Neuberger Berman
Assuming the 90 days horizon Western Asset is expected to generate 2.83 times less return on investment than Neuberger Berman. But when comparing it to its historical volatility, Western Asset High is 3.62 times less risky than Neuberger Berman. It trades about 0.21 of its potential returns per unit of risk. Neuberger Berman Large is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 4,791 in Neuberger Berman Large on August 29, 2024 and sell it today you would earn a total of 115.00 from holding Neuberger Berman Large or generate 2.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Western Asset High vs. Neuberger Berman Large
Performance |
| Timeline |
| Western Asset High |
| Neuberger Berman Large |
Western Asset and Neuberger Berman Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Asset and Neuberger Berman
The main advantage of trading using opposite Western Asset and Neuberger Berman positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Asset position performs unexpectedly, Neuberger Berman 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 Neuberger Berman will offset losses from the drop in Neuberger Berman'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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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