Correlation Between Western Assets and The Emerging
Can any of the company-specific risk be diversified away by investing in both Western Assets and The 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 The 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 The Emerging Markets, you can compare the effects of market volatilities on Western Assets and The 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 The Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Assets and The Emerging.
Diversification Opportunities for Western Assets and The Emerging
0.44 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Western and The is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Western Assets Emerging and The Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 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 The Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Emerging Markets has no effect on the direction of Western Assets i.e., Western Assets and The Emerging go up and down completely randomly.
Pair Corralation between Western Assets and The Emerging
Assuming the 90 days horizon Western Assets Emerging is expected to generate 0.45 times more return on investment than The Emerging. However, Western Assets Emerging is 2.22 times less risky than The Emerging. It trades about 0.2 of its potential returns per unit of risk. The Emerging Markets is currently generating about 0.05 per unit of risk. If you would invest 864.00 in Western Assets Emerging on September 4, 2024 and sell it today you would earn a total of 215.00 from holding Western Assets Emerging or generate 24.88% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.66% |
| Values | Daily Returns |
Western Assets Emerging vs. The Emerging Markets
Performance |
| Timeline |
| Western Assets Emerging |
| Emerging Markets |
Western Assets and The Emerging Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Assets and The Emerging
The main advantage of trading using opposite Western Assets and The Emerging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Assets position performs unexpectedly, The 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 The Emerging will offset losses from the drop in The Emerging's long position.| Western Assets vs. Heartland Value Plus | Western Assets vs. Royce Opportunity Fund | Western Assets vs. Royce Opportunity Fund | Western Assets vs. Queens Road Small |
| The Emerging vs. Vanguard Total Stock | The Emerging vs. Vanguard 500 Index | The Emerging vs. Vanguard Total Stock | The Emerging vs. Vanguard Total Stock |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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