Correlation Between Western Asset and Fidelity Salem
Can any of the company-specific risk be diversified away by investing in both Western Asset and Fidelity Salem 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 Fidelity Salem 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 Fidelity Salem Street, you can compare the effects of market volatilities on Western Asset and Fidelity Salem 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 Fidelity Salem. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Asset and Fidelity Salem.
Diversification Opportunities for Western Asset and Fidelity Salem
0.04 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Western and Fidelity is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset Municipal and Fidelity Salem Street in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Salem Street 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 Fidelity Salem. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Salem Street has no effect on the direction of Western Asset i.e., Western Asset and Fidelity Salem go up and down completely randomly.
Pair Corralation between Western Asset and Fidelity Salem
Assuming the 90 days horizon Western Asset is expected to generate 6.45 times less return on investment than Fidelity Salem. But when comparing it to its historical volatility, Western Asset Municipal is 3.45 times less risky than Fidelity Salem. It trades about 0.06 of its potential returns per unit of risk. Fidelity Salem Street is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 1,286 in Fidelity Salem Street on November 27, 2024 and sell it today you would earn a total of 23.00 from holding Fidelity Salem Street or generate 1.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Western Asset Municipal vs. Fidelity Salem Street
Performance |
| Timeline |
| Western Asset Municipal |
| Fidelity Salem Street |
Western Asset and Fidelity Salem Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Asset and Fidelity Salem
The main advantage of trading using opposite Western Asset and Fidelity Salem positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Asset position performs unexpectedly, Fidelity Salem 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 Fidelity Salem will offset losses from the drop in Fidelity Salem's long position.| Western Asset vs. Ocm Mutual Fund | Western Asset vs. World Precious Minerals | Western Asset vs. Invesco Gold Special | Western Asset vs. Deutsche Gold Precious |
| Fidelity Salem vs. Fxybjx | Fidelity Salem vs. Flakqx | Fidelity Salem vs. Arrow Managed Futures | Fidelity Salem vs. Fkhemx |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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