Correlation Between Western Assets and Northern Large
Can any of the company-specific risk be diversified away by investing in both Western Assets and Northern Large 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 Northern Large 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 Northern Large Cap, you can compare the effects of market volatilities on Western Assets and Northern Large 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 Northern Large. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Assets and Northern Large.
Diversification Opportunities for Western Assets and Northern Large
0.11 | Correlation Coefficient |
Average diversification
The 3 months correlation between Western and Northern is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Western Assets Emerging and Northern Large Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern Large Cap 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 Northern Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northern Large Cap has no effect on the direction of Western Assets i.e., Western Assets and Northern Large go up and down completely randomly.
Pair Corralation between Western Assets and Northern Large
Assuming the 90 days horizon Western Assets is expected to generate 1.38 times less return on investment than Northern Large. But when comparing it to its historical volatility, Western Assets Emerging is 1.89 times less risky than Northern Large. It trades about 0.1 of its potential returns per unit of risk. Northern Large Cap is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 1,807 in Northern Large Cap on September 3, 2024 and sell it today you would earn a total of 537.00 from holding Northern Large Cap or generate 29.72% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Western Assets Emerging vs. Northern Large Cap
Performance |
| Timeline |
| Western Assets Emerging |
| Northern Large Cap |
Western Assets and Northern Large Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Assets and Northern Large
The main advantage of trading using opposite Western Assets and Northern Large positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Assets position performs unexpectedly, Northern Large 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 Northern Large will offset losses from the drop in Northern Large'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 |
| Northern Large vs. Oklahoma College Savings | Northern Large vs. Western Assets Emerging | Northern Large vs. Barings Emerging Markets | Northern Large vs. Jpmorgan Emerging Markets |
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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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