Correlation Between Western Asset and American Funds
Can any of the company-specific risk be diversified away by investing in both Western Asset and American Funds 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 American Funds 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 American Funds Income, you can compare the effects of market volatilities on Western Asset and American Funds 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 American Funds. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Asset and American Funds.
Diversification Opportunities for Western Asset and American Funds
0.43 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Western and American is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset High and American Funds Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Funds Income 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 American Funds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Funds Income has no effect on the direction of Western Asset i.e., Western Asset and American Funds go up and down completely randomly.
Pair Corralation between Western Asset and American Funds
Assuming the 90 days horizon Western Asset is expected to generate 389.0 times less return on investment than American Funds. But when comparing it to its historical volatility, Western Asset High is 1.99 times less risky than American Funds. It trades about 0.0 of its potential returns per unit of risk. American Funds Income is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 1,353 in American Funds Income on September 15, 2024 and sell it today you would earn a total of 11.00 from holding American Funds Income or generate 0.81% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Western Asset High vs. American Funds Income
Performance |
| Timeline |
| Western Asset High |
| American Funds Income |
Western Asset and American Funds Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Asset and American Funds
The main advantage of trading using opposite Western Asset and American Funds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Asset position performs unexpectedly, American Funds 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 American Funds will offset losses from the drop in American Funds' long position.| Western Asset vs. Ms Global Fixed | Western Asset vs. Ab Select Equity | Western Asset vs. Us Vector Equity | Western Asset vs. Scharf Fund Retail |
| American Funds vs. Western Asset High | American Funds vs. Fa 529 Aggressive | American Funds vs. California High Yield Municipal | American Funds vs. T Rowe Price |
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 CEOs Directory module to screen CEOs from public companies around the world.
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