Correlation Between Western Asset and Vanguard High-yield
Can any of the company-specific risk be diversified away by investing in both Western Asset and Vanguard High-yield 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 Vanguard High-yield 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 Vanguard High Yield Corporate, you can compare the effects of market volatilities on Western Asset and Vanguard High-yield 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 Vanguard High-yield. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Asset and Vanguard High-yield.
Diversification Opportunities for Western Asset and Vanguard High-yield
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Western and Vanguard is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset High and Vanguard High Yield Corporate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard High Yield 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 Vanguard High-yield. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard High Yield has no effect on the direction of Western Asset i.e., Western Asset and Vanguard High-yield go up and down completely randomly.
Pair Corralation between Western Asset and Vanguard High-yield
Assuming the 90 days horizon Western Asset High is expected to generate 1.13 times more return on investment than Vanguard High-yield. However, Western Asset is 1.13 times more volatile than Vanguard High Yield Corporate. It trades about 0.19 of its potential returns per unit of risk. Vanguard High Yield Corporate is currently generating about 0.12 per unit of risk. If you would invest 683.00 in Western Asset High on September 2, 2024 and sell it today you would earn a total of 13.00 from holding Western Asset High or generate 1.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Western Asset High vs. Vanguard High Yield Corporate
Performance |
| Timeline |
| Western Asset High |
| Vanguard High Yield |
Western Asset and Vanguard High-yield Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Asset and Vanguard High-yield
The main advantage of trading using opposite Western Asset and Vanguard High-yield positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Asset position performs unexpectedly, Vanguard High-yield 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 Vanguard High-yield will offset losses from the drop in Vanguard High-yield's long position.| Western Asset vs. Transamerica Emerging Markets | Western Asset vs. Pnc Emerging Markets | Western Asset vs. Locorr Market Trend | Western Asset vs. Aqr Sustainable Long Short |
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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