Correlation Between Western Asset and Iaadx
Can any of the company-specific risk be diversified away by investing in both Western Asset and Iaadx 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 Iaadx 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 Iaadx, you can compare the effects of market volatilities on Western Asset and Iaadx 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 Iaadx. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Asset and Iaadx.
Diversification Opportunities for Western Asset and Iaadx
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Western and Iaadx is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset Municipal and Iaadx in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Iaadx 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 Iaadx. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Iaadx has no effect on the direction of Western Asset i.e., Western Asset and Iaadx go up and down completely randomly.
Pair Corralation between Western Asset and Iaadx
Assuming the 90 days horizon Western Asset Municipal is expected to under-perform the Iaadx. But the mutual fund apears to be less risky and, when comparing its historical volatility, Western Asset Municipal is 1.07 times less risky than Iaadx. The mutual fund trades about -0.03 of its potential returns per unit of risk. The Iaadx is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 880.00 in Iaadx on August 27, 2024 and sell it today you would earn a total of 48.00 from holding Iaadx or generate 5.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Western Asset Municipal vs. Iaadx
Performance |
| Timeline |
| Western Asset Municipal |
| Iaadx |
Western Asset and Iaadx Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Asset and Iaadx
The main advantage of trading using opposite Western Asset and Iaadx positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Asset position performs unexpectedly, Iaadx 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 Iaadx will offset losses from the drop in Iaadx's long position.| Western Asset vs. T Rowe Price | Western Asset vs. Gamco Global Telecommunications | Western Asset vs. Oklahoma Municipal Fund | Western Asset vs. Vanguard Short Term Government |
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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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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