Correlation Between Western Asset and Income Fund
Can any of the company-specific risk be diversified away by investing in both Western Asset and Income Fund 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 Income Fund 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 Income Fund Of, you can compare the effects of market volatilities on Western Asset and Income Fund 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 Income Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Asset and Income Fund.
Diversification Opportunities for Western Asset and Income Fund
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Western and Income is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset High and Income Fund Of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Income Fund 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 Income Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Income Fund has no effect on the direction of Western Asset i.e., Western Asset and Income Fund go up and down completely randomly.
Pair Corralation between Western Asset and Income Fund
Assuming the 90 days horizon Western Asset is expected to generate 3.3 times less return on investment than Income Fund. But when comparing it to its historical volatility, Western Asset High is 2.99 times less risky than Income Fund. It trades about 0.2 of its potential returns per unit of risk. Income Fund Of is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest 2,561 in Income Fund Of on September 1, 2024 and sell it today you would earn a total of 48.00 from holding Income Fund Of or generate 1.87% 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. Income Fund Of
Performance |
| Timeline |
| Western Asset High |
| Income Fund |
Western Asset and Income Fund Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Asset and Income Fund
The main advantage of trading using opposite Western Asset and Income Fund positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Asset position performs unexpectedly, Income Fund 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 Income Fund will offset losses from the drop in Income Fund's long position.| Western Asset vs. Clearbridge Aggressive Growth | Western Asset vs. Clearbridge Small Cap | Western Asset vs. Qs International Equity | Western Asset vs. Clearbridge Appreciation Fund |
| Income Fund vs. Strategic Allocation Aggressive | Income Fund vs. Western Asset High | Income Fund vs. Federated Institutional High | Income Fund vs. Lgm Risk Managed |
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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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