Correlation Between Western Asset and Global Fixed
Can any of the company-specific risk be diversified away by investing in both Western Asset and Global Fixed 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 Global Fixed 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 Global Fixed Income, you can compare the effects of market volatilities on Western Asset and Global Fixed 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 Global Fixed. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Asset and Global Fixed.
Diversification Opportunities for Western Asset and Global Fixed
0.48 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Western and Global is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset Municipal and Global Fixed Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Fixed 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 Global Fixed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Fixed Income has no effect on the direction of Western Asset i.e., Western Asset and Global Fixed go up and down completely randomly.
Pair Corralation between Western Asset and Global Fixed
Assuming the 90 days horizon Western Asset Municipal is expected to generate 1.58 times more return on investment than Global Fixed. However, Western Asset is 1.58 times more volatile than Global Fixed Income. It trades about 0.19 of its potential returns per unit of risk. Global Fixed Income is currently generating about 0.28 per unit of risk. If you would invest 725.00 in Western Asset Municipal on September 14, 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 | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Western Asset Municipal vs. Global Fixed Income
Performance |
| Timeline |
| Western Asset Municipal |
| Global Fixed Income |
Western Asset and Global Fixed Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Asset and Global Fixed
The main advantage of trading using opposite Western Asset and Global Fixed positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Asset position performs unexpectedly, Global Fixed 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 Global Fixed will offset losses from the drop in Global Fixed's long position.| Western Asset vs. Vanguard Total Stock | Western Asset vs. Vanguard 500 Index | Western Asset vs. Vanguard Total Stock | Western Asset vs. Vanguard Total Stock |
| Global Fixed vs. Western Asset Municipal | Global Fixed vs. The National Tax Free | Global Fixed vs. T Rowe Price | Global Fixed vs. Bbh Intermediate 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 Global Correlations module to find global opportunities by holding instruments from different markets.
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