Correlation Between Western Assets and Davenport
Can any of the company-specific risk be diversified away by investing in both Western Assets and Davenport 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 Davenport 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 Davenport E Fund, you can compare the effects of market volatilities on Western Assets and Davenport 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 Davenport. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Assets and Davenport.
Diversification Opportunities for Western Assets and Davenport
-0.07 | Correlation Coefficient |
Good diversification
The 3 months correlation between Western and Davenport is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Western Assets Emerging and Davenport E Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Davenport E Fund 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 Davenport. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Davenport E Fund has no effect on the direction of Western Assets i.e., Western Assets and Davenport go up and down completely randomly.
Pair Corralation between Western Assets and Davenport
Assuming the 90 days horizon Western Assets Emerging is expected to generate 0.42 times more return on investment than Davenport. However, Western Assets Emerging is 2.39 times less risky than Davenport. It trades about 0.11 of its potential returns per unit of risk. Davenport E Fund is currently generating about -0.11 per unit of risk. If you would invest 1,083 in Western Assets Emerging on September 12, 2024 and sell it today you would earn a total of 7.00 from holding Western Assets Emerging or generate 0.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Western Assets Emerging vs. Davenport E Fund
Performance |
| Timeline |
| Western Assets Emerging |
| Davenport E Fund |
Western Assets and Davenport Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Assets and Davenport
The main advantage of trading using opposite Western Assets and Davenport positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Assets position performs unexpectedly, Davenport 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 Davenport will offset losses from the drop in Davenport's long position.| Western Assets vs. Cb Large Cap | Western Assets vs. American Mutual Fund | Western Assets vs. Americafirst Large Cap | Western Assets vs. Dodge Cox Stock |
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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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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