Correlation Between Western Assets and Capital World
Can any of the company-specific risk be diversified away by investing in both Western Assets and Capital World 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 Capital World 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 Capital World Bond, you can compare the effects of market volatilities on Western Assets and Capital World 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 Capital World. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Assets and Capital World.
Diversification Opportunities for Western Assets and Capital World
0.45 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Western and Capital is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Western Assets Emerging and Capital World Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital World Bond 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 Capital World. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital World Bond has no effect on the direction of Western Assets i.e., Western Assets and Capital World go up and down completely randomly.
Pair Corralation between Western Assets and Capital World
Assuming the 90 days horizon Western Assets Emerging is expected to generate 1.0 times more return on investment than Capital World. However, Western Assets Emerging is 1.0 times less risky than Capital World. It trades about 0.08 of its potential returns per unit of risk. Capital World Bond is currently generating about -0.16 per unit of risk. If you would invest 1,072 in Western Assets Emerging on September 12, 2024 and sell it today you would earn a total of 17.00 from holding Western Assets Emerging or generate 1.59% 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. Capital World Bond
Performance |
| Timeline |
| Western Assets Emerging |
| Capital World Bond |
Western Assets and Capital World Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Assets and Capital World
The main advantage of trading using opposite Western Assets and Capital World positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Assets position performs unexpectedly, Capital World 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 Capital World will offset losses from the drop in Capital World's long position.| Western Assets vs. Ftfa Franklin Templeton Growth | Western Assets vs. Smallcap Growth Fund | Western Assets vs. T Rowe Price | Western Assets vs. Champlain Mid Cap |
| Capital World vs. Global Gold Fund | Capital World vs. Vy Goldman Sachs | Capital World vs. Goldman Sachs Clean | Capital World vs. James Balanced Golden |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
Other Complementary Tools
| Portfolio Center All portfolio management and optimization tools to improve performance of your portfolios | |
| Risk-Return Analysis View associations between returns expected from investment and the risk you assume | |
| Funds Screener Find actively-traded funds from around the world traded on over 30 global exchanges | |
| Idea Breakdown Analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes | |
| Watchlist Optimization Optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm |