Correlation Between Western Asset and Value Line
Can any of the company-specific risk be diversified away by investing in both Western Asset and Value Line 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 Value Line 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 Value Line Mid, you can compare the effects of market volatilities on Western Asset and Value Line 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 Value Line. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Asset and Value Line.
Diversification Opportunities for Western Asset and Value Line
0.43 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Western and Value is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset High and Value Line Mid in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Value Line Mid 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 Value Line. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Value Line Mid has no effect on the direction of Western Asset i.e., Western Asset and Value Line go up and down completely randomly.
Pair Corralation between Western Asset and Value Line
Assuming the 90 days horizon Western Asset is expected to generate 1.84 times less return on investment than Value Line. But when comparing it to its historical volatility, Western Asset High is 2.7 times less risky than Value Line. It trades about 0.11 of its potential returns per unit of risk. Value Line Mid is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 2,745 in Value Line Mid on September 4, 2024 and sell it today you would earn a total of 1,005 from holding Value Line Mid or generate 36.61% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.8% |
| Values | Daily Returns |
Western Asset High vs. Value Line Mid
Performance |
| Timeline |
| Western Asset High |
| Value Line Mid |
Western Asset and Value Line Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Asset and Value Line
The main advantage of trading using opposite Western Asset and Value Line positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Asset position performs unexpectedly, Value Line 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 Value Line will offset losses from the drop in Value Line'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 |
| Value Line vs. Fisher Small Cap | Value Line vs. Tax Managed Mid Small | Value Line vs. Chartwell Small Cap | Value Line vs. Artisan Small Cap |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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