Correlation Between Western Assets and Locorr Market
Can any of the company-specific risk be diversified away by investing in both Western Assets and Locorr Market 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 Locorr Market 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 Locorr Market Trend, you can compare the effects of market volatilities on Western Assets and Locorr Market 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 Locorr Market. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Assets and Locorr Market.
Diversification Opportunities for Western Assets and Locorr Market
0.31 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Western and Locorr is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Western Assets Emerging and Locorr Market Trend in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Locorr Market Trend 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 Locorr Market. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Locorr Market Trend has no effect on the direction of Western Assets i.e., Western Assets and Locorr Market go up and down completely randomly.
Pair Corralation between Western Assets and Locorr Market
Assuming the 90 days horizon Western Assets Emerging is expected to generate 0.29 times more return on investment than Locorr Market. However, Western Assets Emerging is 3.43 times less risky than Locorr Market. It trades about 0.13 of its potential returns per unit of risk. Locorr Market Trend is currently generating about -0.05 per unit of risk. If you would invest 1,015 in Western Assets Emerging on September 3, 2024 and sell it today you would earn a total of 64.00 from holding Western Assets Emerging or generate 6.31% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Western Assets Emerging vs. Locorr Market Trend
Performance |
| Timeline |
| Western Assets Emerging |
| Locorr Market Trend |
Western Assets and Locorr Market Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Assets and Locorr Market
The main advantage of trading using opposite Western Assets and Locorr Market positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Assets position performs unexpectedly, Locorr Market 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 Locorr Market will offset losses from the drop in Locorr Market'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 |
| Locorr Market vs. Aqr Managed Futures | Locorr Market vs. Pimco Trends Managed | Locorr Market vs. Pimco Trends Managed | Locorr Market vs. American Beacon Ahl |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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