Correlation Between Western Asset and Global Bond
Can any of the company-specific risk be diversified away by investing in both Western Asset and Global Bond 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 Bond 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 Bond Fund, you can compare the effects of market volatilities on Western Asset and Global Bond 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 Bond. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Asset and Global Bond.
Diversification Opportunities for Western Asset and Global Bond
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Western and Global is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset Municipal and Global Bond Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Bond Fund 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 Bond. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Bond Fund has no effect on the direction of Western Asset i.e., Western Asset and Global Bond go up and down completely randomly.
Pair Corralation between Western Asset and Global Bond
Assuming the 90 days horizon Western Asset is expected to generate 4.79 times less return on investment than Global Bond. But when comparing it to its historical volatility, Western Asset Municipal is 1.24 times less risky than Global Bond. It trades about 0.02 of its potential returns per unit of risk. Global Bond Fund is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 827.00 in Global Bond Fund on September 4, 2024 and sell it today you would earn a total of 41.00 from holding Global Bond Fund or generate 4.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Western Asset Municipal vs. Global Bond Fund
Performance |
| Timeline |
| Western Asset Municipal |
| Global Bond Fund |
Western Asset and Global Bond Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Asset and Global Bond
The main advantage of trading using opposite Western Asset and Global Bond positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Asset position performs unexpectedly, Global Bond 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 Bond will offset losses from the drop in Global Bond'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 |
| Global Bond vs. Bbh Intermediate Municipal | Global Bond vs. Fa 529 Aggressive | Global Bond vs. Balanced Fund Investor | Global Bond 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 Stocks Directory module to find actively traded stocks across global markets.
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