Correlation Between Western Asset and Preferred Securities
Can any of the company-specific risk be diversified away by investing in both Western Asset and Preferred Securities 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 Preferred Securities 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 Preferred Securities Fund, you can compare the effects of market volatilities on Western Asset and Preferred Securities 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 Preferred Securities. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Asset and Preferred Securities.
Diversification Opportunities for Western Asset and Preferred Securities
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Western and Preferred is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset High and Preferred Securities Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Preferred Securities 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 Preferred Securities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Preferred Securities has no effect on the direction of Western Asset i.e., Western Asset and Preferred Securities go up and down completely randomly.
Pair Corralation between Western Asset and Preferred Securities
Assuming the 90 days horizon Western Asset High is expected to generate 0.97 times more return on investment than Preferred Securities. However, Western Asset High is 1.03 times less risky than Preferred Securities. It trades about 0.11 of its potential returns per unit of risk. Preferred Securities Fund is currently generating about 0.08 per unit of risk. If you would invest 593.00 in Western Asset High on September 3, 2024 and sell it today you would earn a total of 115.00 from holding Western Asset High or generate 19.39% 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. Preferred Securities Fund
Performance |
| Timeline |
| Western Asset High |
| Preferred Securities |
Western Asset and Preferred Securities Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Asset and Preferred Securities
The main advantage of trading using opposite Western Asset and Preferred Securities positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Asset position performs unexpectedly, Preferred Securities 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 Preferred Securities will offset losses from the drop in Preferred Securities' long position.| Western Asset vs. Oklahoma College Savings | Western Asset vs. Massmutual Select Diversified | Western Asset vs. Jpmorgan Emerging Markets | Western Asset vs. Locorr Market Trend |
| Preferred Securities vs. Cohen Steers Prfrd | Preferred Securities vs. Cohen Steers Preferred | Preferred Securities vs. Preferred Securities Fund | Preferred Securities vs. Aquagold International |
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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