Correlation Between Western Asset and Vaughan Nelson
Can any of the company-specific risk be diversified away by investing in both Western Asset and Vaughan Nelson 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 Vaughan Nelson 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 Vaughan Nelson Value, you can compare the effects of market volatilities on Western Asset and Vaughan Nelson 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 Vaughan Nelson. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Asset and Vaughan Nelson.
Diversification Opportunities for Western Asset and Vaughan Nelson
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Western and Vaughan is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset High and Vaughan Nelson Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vaughan Nelson Value 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 Vaughan Nelson. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vaughan Nelson Value has no effect on the direction of Western Asset i.e., Western Asset and Vaughan Nelson go up and down completely randomly.
Pair Corralation between Western Asset and Vaughan Nelson
Assuming the 90 days horizon Western Asset is expected to generate 23.54 times less return on investment than Vaughan Nelson. But when comparing it to its historical volatility, Western Asset High is 9.43 times less risky than Vaughan Nelson. It trades about 0.15 of its potential returns per unit of risk. Vaughan Nelson Value is currently generating about 0.38 of returns per unit of risk over similar time horizon. If you would invest 2,698 in Vaughan Nelson Value on September 3, 2024 and sell it today you would earn a total of 279.00 from holding Vaughan Nelson Value or generate 10.34% 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. Vaughan Nelson Value
Performance |
| Timeline |
| Western Asset High |
| Vaughan Nelson Value |
Western Asset and Vaughan Nelson Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Asset and Vaughan Nelson
The main advantage of trading using opposite Western Asset and Vaughan Nelson positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Asset position performs unexpectedly, Vaughan Nelson 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 Vaughan Nelson will offset losses from the drop in Vaughan Nelson's long position.| Western Asset vs. Oklahoma College Savings | Western Asset vs. Massmutual Select Diversified | Western Asset vs. Jpmorgan Emerging Markets | Western Asset vs. Locorr Market Trend |
| Vaughan Nelson vs. Vanguard Mid Cap Index | Vaughan Nelson vs. Vanguard Mid Cap Index | Vaughan Nelson vs. Vanguard Mid Cap Index | Vaughan Nelson vs. Vanguard Mid Cap Index |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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