Correlation Between Western Assets and Smallcap Growth
Can any of the company-specific risk be diversified away by investing in both Western Assets and Smallcap Growth 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 Smallcap Growth 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 Smallcap Growth Fund, you can compare the effects of market volatilities on Western Assets and Smallcap Growth 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 Smallcap Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Assets and Smallcap Growth.
Diversification Opportunities for Western Assets and Smallcap Growth
0.21 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Western and Smallcap is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Western Assets Emerging and Smallcap Growth Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Smallcap Growth 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 Smallcap Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Smallcap Growth has no effect on the direction of Western Assets i.e., Western Assets and Smallcap Growth go up and down completely randomly.
Pair Corralation between Western Assets and Smallcap Growth
Assuming the 90 days horizon Western Assets is expected to generate 1.89 times less return on investment than Smallcap Growth. But when comparing it to its historical volatility, Western Assets Emerging is 2.77 times less risky than Smallcap Growth. It trades about 0.1 of its potential returns per unit of risk. Smallcap Growth Fund is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 1,217 in Smallcap Growth Fund on August 26, 2024 and sell it today you would earn a total of 490.00 from holding Smallcap Growth Fund or generate 40.26% 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. Smallcap Growth Fund
Performance |
| Timeline |
| Western Assets Emerging |
| Smallcap Growth |
Western Assets and Smallcap Growth Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Assets and Smallcap Growth
The main advantage of trading using opposite Western Assets and Smallcap Growth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Assets position performs unexpectedly, Smallcap Growth 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 Smallcap Growth will offset losses from the drop in Smallcap Growth'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 |
| Smallcap Growth vs. Western Assets Emerging | Smallcap Growth vs. Pace International Emerging | Smallcap Growth vs. Angel Oak Multi Strategy | Smallcap Growth vs. Rbc 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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