Correlation Between Western Asset and Dynamic Total
Can any of the company-specific risk be diversified away by investing in both Western Asset and Dynamic Total 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 Dynamic Total 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 Dynamic Total Return, you can compare the effects of market volatilities on Western Asset and Dynamic Total 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 Dynamic Total. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Asset and Dynamic Total.
Diversification Opportunities for Western Asset and Dynamic Total
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Western and Dynamic is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset Municipal and Dynamic Total Return in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dynamic Total Return 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 Dynamic Total. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dynamic Total Return has no effect on the direction of Western Asset i.e., Western Asset and Dynamic Total go up and down completely randomly.
Pair Corralation between Western Asset and Dynamic Total
Assuming the 90 days horizon Western Asset is expected to generate 42.17 times less return on investment than Dynamic Total. But when comparing it to its historical volatility, Western Asset Municipal is 1.3 times less risky than Dynamic Total. It trades about 0.0 of its potential returns per unit of risk. Dynamic Total Return is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 1,209 in Dynamic Total Return on December 4, 2024 and sell it today you would earn a total of 157.00 from holding Dynamic Total Return or generate 12.99% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.8% |
| Values | Daily Returns |
Western Asset Municipal vs. Dynamic Total Return
Performance |
| Timeline |
| Western Asset Municipal |
| Dynamic Total Return |
Western Asset and Dynamic Total Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Asset and Dynamic Total
The main advantage of trading using opposite Western Asset and Dynamic Total positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Asset position performs unexpectedly, Dynamic Total 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 Dynamic Total will offset losses from the drop in Dynamic Total's long position.| Western Asset vs. Doubleline Emerging Markets | Western Asset vs. Massmutual Premier Diversified | Western Asset vs. Angel Oak Ultrashort | Western Asset vs. Aqr Sustainable Long Short |
| Dynamic Total vs. Mesirow Financial Small | Dynamic Total vs. Davis Financial Fund | Dynamic Total vs. Goldman Sachs Financial | Dynamic Total vs. Gabelli Global Financial |
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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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