Correlation Between Western Asset and Aggressive Growth
Can any of the company-specific risk be diversified away by investing in both Western Asset and Aggressive Growth 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 Aggressive Growth 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 Aggressive Growth Fund, you can compare the effects of market volatilities on Western Asset and Aggressive Growth 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 Aggressive Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Asset and Aggressive Growth.
Diversification Opportunities for Western Asset and Aggressive Growth
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Western and Aggressive is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset High and Aggressive Growth Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aggressive Growth 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 Aggressive Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aggressive Growth has no effect on the direction of Western Asset i.e., Western Asset and Aggressive Growth go up and down completely randomly.
Pair Corralation between Western Asset and Aggressive Growth
Assuming the 90 days horizon Western Asset is expected to generate 8.35 times less return on investment than Aggressive Growth. But when comparing it to its historical volatility, Western Asset High is 8.48 times less risky than Aggressive Growth. It trades about 0.11 of its potential returns per unit of risk. Aggressive Growth Fund is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 7,205 in Aggressive Growth Fund on September 13, 2024 and sell it today you would earn a total of 173.00 from holding Aggressive Growth Fund or generate 2.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Western Asset High vs. Aggressive Growth Fund
Performance |
| Timeline |
| Western Asset High |
| Aggressive Growth |
Western Asset and Aggressive Growth Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Asset and Aggressive Growth
The main advantage of trading using opposite Western Asset and Aggressive Growth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Asset position performs unexpectedly, Aggressive Growth 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 Aggressive Growth will offset losses from the drop in Aggressive Growth's long position.| Western Asset vs. Jpmorgan Smartretirement 2035 | Western Asset vs. Columbia Moderate Growth | Western Asset vs. Qs Moderate Growth | Western Asset vs. Sierra E Retirement |
| Aggressive Growth vs. Capital Growth Fund | Aggressive Growth vs. Emerging Markets Fund | Aggressive Growth vs. High Income Fund | Aggressive Growth vs. International Fund 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
Other Complementary Tools
| Money Flow Index Determine momentum by analyzing Money Flow Index and other technical indicators | |
| Portfolio Rebalancing Analyze risk-adjusted returns against different time horizons to find asset-allocation targets | |
| Pattern Recognition Use different Pattern Recognition models to time the market across multiple global exchanges | |
| Analyst Advice Analyst recommendations and target price estimates broken down by several categories | |
| Correlation Analysis Reduce portfolio risk simply by holding instruments which are not perfectly correlated |