Correlation Between Western Asset and Archer Income
Can any of the company-specific risk be diversified away by investing in both Western Asset and Archer Income 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 Asset and Archer Income into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Western Asset Municipal and Archer Income Fund, you can compare the effects of market volatilities on Western Asset and Archer Income 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 Asset with a short position of Archer Income. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Asset and Archer Income.
Diversification Opportunities for Western Asset and Archer Income
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Western and Archer is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset Municipal and Archer Income Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Archer Income and Western Asset 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 Asset Municipal are associated (or correlated) with Archer Income. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Archer Income has no effect on the direction of Western Asset i.e., Western Asset and Archer Income go up and down completely randomly.
Pair Corralation between Western Asset and Archer Income
Assuming the 90 days horizon Western Asset Municipal is expected to generate 3.0 times more return on investment than Archer Income. However, Western Asset is 3.0 times more volatile than Archer Income Fund. It trades about 0.11 of its potential returns per unit of risk. Archer Income Fund is currently generating about 0.18 per unit of risk. If you would invest 725.00 in Western Asset Municipal on September 4, 2024 and sell it today you would earn a total of 6.00 from holding Western Asset Municipal or generate 0.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.24% |
| Values | Daily Returns |
Western Asset Municipal vs. Archer Income Fund
Performance |
| Timeline |
| Western Asset Municipal |
| Archer Income |
Western Asset and Archer Income Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Asset and Archer Income
The main advantage of trading using opposite Western Asset and Archer Income positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Asset position performs unexpectedly, Archer Income 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 Archer Income will offset losses from the drop in Archer Income's long position.| Western Asset vs. Icon Natural Resources | Western Asset vs. Invesco Energy Fund | Western Asset vs. Dreyfus Natural Resources | Western Asset vs. Gmo Resources |
| Archer Income vs. Fabxx | Archer Income vs. Materials Portfolio Fidelity | Archer Income vs. Leggmason Partners Institutional | Archer Income vs. Western Asset Municipal |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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