Correlation Between Western Assets and Barings Emerging
Can any of the company-specific risk be diversified away by investing in both Western Assets and Barings Emerging 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 Assets and Barings Emerging into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Western Assets Emerging and Barings Emerging Markets, you can compare the effects of market volatilities on Western Assets and Barings Emerging 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 Assets with a short position of Barings Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Assets and Barings Emerging.
Diversification Opportunities for Western Assets and Barings Emerging
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Western and Barings is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Western Assets Emerging and Barings Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Barings Emerging Markets and Western Assets 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 Assets Emerging are associated (or correlated) with Barings Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Barings Emerging Markets has no effect on the direction of Western Assets i.e., Western Assets and Barings Emerging go up and down completely randomly.
Pair Corralation between Western Assets and Barings Emerging
Assuming the 90 days horizon Western Assets Emerging is expected to generate 1.09 times more return on investment than Barings Emerging. However, Western Assets is 1.09 times more volatile than Barings Emerging Markets. It trades about -0.06 of its potential returns per unit of risk. Barings Emerging Markets is currently generating about -0.15 per unit of risk. If you would invest 1,079 in Western Assets Emerging on August 25, 2024 and sell it today you would lose (10.00) from holding Western Assets Emerging or give up 0.93% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Western Assets Emerging vs. Barings Emerging Markets
Performance |
| Timeline |
| Western Assets Emerging |
| Barings Emerging Markets |
Western Assets and Barings Emerging Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Assets and Barings Emerging
The main advantage of trading using opposite Western Assets and Barings Emerging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Assets position performs unexpectedly, Barings Emerging 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 Barings Emerging will offset losses from the drop in Barings Emerging's long position.| Western Assets vs. Vanguard Total Stock | Western Assets vs. Vanguard 500 Index | Western Assets vs. Vanguard Total Stock | Western Assets vs. Vanguard Total Stock |
| Barings Emerging vs. Jhancock Short Duration | Barings Emerging vs. Maryland Short Term Tax Free | Barings Emerging vs. Locorr Longshort Modities | Barings Emerging vs. Ab Select Longshort |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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