Correlation Between Western Assets and College Retirement
Can any of the company-specific risk be diversified away by investing in both Western Assets and College Retirement 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 College Retirement 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 College Retirement Equities, you can compare the effects of market volatilities on Western Assets and College Retirement 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 College Retirement. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Assets and College Retirement.
Diversification Opportunities for Western Assets and College Retirement
0.44 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Western and College is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Western Assets Emerging and College Retirement Equities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on College Retirement 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 College Retirement. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of College Retirement has no effect on the direction of Western Assets i.e., Western Assets and College Retirement go up and down completely randomly.
Pair Corralation between Western Assets and College Retirement
Assuming the 90 days horizon Western Assets is expected to generate 3.48 times less return on investment than College Retirement. But when comparing it to its historical volatility, Western Assets Emerging is 2.68 times less risky than College Retirement. It trades about 0.14 of its potential returns per unit of risk. College Retirement Equities is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest 50,365 in College Retirement Equities on November 3, 2024 and sell it today you would earn a total of 1,650 from holding College Retirement Equities or generate 3.28% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Western Assets Emerging vs. College Retirement Equities
Performance |
| Timeline |
| Western Assets Emerging |
| College Retirement |
Western Assets and College Retirement Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Assets and College Retirement
The main advantage of trading using opposite Western Assets and College Retirement positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Assets position performs unexpectedly, College Retirement 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 College Retirement will offset losses from the drop in College Retirement's long position.| Western Assets vs. Schwab Small Cap Index | Western Assets vs. Tax Managed Mid Small | Western Assets vs. Lord Abbett Diversified | Western Assets vs. Lord Abbett Diversified |
| College Retirement vs. Morgan Stanley Emerging | College Retirement vs. Federated Emerging Market | College Retirement vs. Commodities Strategy Fund | College Retirement 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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