Correlation Between Western Asset and Arrow Managed
Can any of the company-specific risk be diversified away by investing in both Western Asset and Arrow Managed 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 Arrow Managed into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Western Asset Intermediate and Arrow Managed Futures, you can compare the effects of market volatilities on Western Asset and Arrow Managed 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 Arrow Managed. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Asset and Arrow Managed.
Diversification Opportunities for Western Asset and Arrow Managed
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Western and Arrow is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset Intermediate and Arrow Managed Futures in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arrow Managed Futures 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 Intermediate are associated (or correlated) with Arrow Managed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arrow Managed Futures has no effect on the direction of Western Asset i.e., Western Asset and Arrow Managed go up and down completely randomly.
Pair Corralation between Western Asset and Arrow Managed
Assuming the 90 days horizon Western Asset Intermediate is expected to generate 0.19 times more return on investment than Arrow Managed. However, Western Asset Intermediate is 5.13 times less risky than Arrow Managed. It trades about 0.04 of its potential returns per unit of risk. Arrow Managed Futures is currently generating about 0.01 per unit of risk. If you would invest 909.00 in Western Asset Intermediate on September 12, 2024 and sell it today you would earn a total of 61.00 from holding Western Asset Intermediate or generate 6.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.8% |
| Values | Daily Returns |
Western Asset Intermediate vs. Arrow Managed Futures
Performance |
| Timeline |
| Western Asset Interm |
| Arrow Managed Futures |
Western Asset and Arrow Managed Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Asset and Arrow Managed
The main advantage of trading using opposite Western Asset and Arrow Managed positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Asset position performs unexpectedly, Arrow Managed 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 Arrow Managed will offset losses from the drop in Arrow Managed's long position.| Western Asset vs. Touchstone Large Cap | Western Asset vs. Upright Assets Allocation | Western Asset vs. Rational Strategic Allocation | Western Asset vs. Fisher Large Cap |
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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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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