Correlation Between Western Asset and Royce Special
Can any of the company-specific risk be diversified away by investing in both Western Asset and Royce Special 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 Royce Special 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 Royce Special Equity, you can compare the effects of market volatilities on Western Asset and Royce Special 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 Royce Special. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Asset and Royce Special.
Diversification Opportunities for Western Asset and Royce Special
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Western and Royce is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset High and Royce Special Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Royce Special Equity 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 Royce Special. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Royce Special Equity has no effect on the direction of Western Asset i.e., Western Asset and Royce Special go up and down completely randomly.
Pair Corralation between Western Asset and Royce Special
Assuming the 90 days horizon Western Asset is expected to generate 5.51 times less return on investment than Royce Special. But when comparing it to its historical volatility, Western Asset High is 6.3 times less risky than Royce Special. It trades about 0.17 of its potential returns per unit of risk. Royce Special Equity is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 1,657 in Royce Special Equity on September 12, 2024 and sell it today you would earn a total of 172.00 from holding Royce Special Equity or generate 10.38% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Western Asset High vs. Royce Special Equity
Performance |
| Timeline |
| Western Asset High |
| Royce Special Equity |
Western Asset and Royce Special Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Asset and Royce Special
The main advantage of trading using opposite Western Asset and Royce Special positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Asset position performs unexpectedly, Royce Special 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 Royce Special will offset losses from the drop in Royce Special's long position.| Western Asset vs. SCOR PK | Western Asset vs. Morningstar Unconstrained Allocation | Western Asset vs. Via Renewables | Western Asset vs. Bondbloxx ETF Trust |
| Royce Special vs. Allianzgi Convertible Income | Royce Special vs. Absolute Convertible Arbitrage | Royce Special vs. Rationalpier 88 Convertible | Royce Special vs. Advent Claymore Convertible |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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