Correlation Between Western Asset and Clearbridge Sustainability
Can any of the company-specific risk be diversified away by investing in both Western Asset and Clearbridge Sustainability 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 Clearbridge Sustainability 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 Clearbridge Sustainability, you can compare the effects of market volatilities on Western Asset and Clearbridge Sustainability 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 Clearbridge Sustainability. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Asset and Clearbridge Sustainability.
Diversification Opportunities for Western Asset and Clearbridge Sustainability
-0.28 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Western and Clearbridge is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset Municipal and Clearbridge Sustainability in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Clearbridge Sustainability 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 Clearbridge Sustainability. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Clearbridge Sustainability has no effect on the direction of Western Asset i.e., Western Asset and Clearbridge Sustainability go up and down completely randomly.
Pair Corralation between Western Asset and Clearbridge Sustainability
Assuming the 90 days horizon Western Asset Municipal is expected to generate 0.17 times more return on investment than Clearbridge Sustainability. However, Western Asset Municipal is 5.96 times less risky than Clearbridge Sustainability. It trades about 0.03 of its potential returns per unit of risk. Clearbridge Sustainability is currently generating about -0.1 per unit of risk. If you would invest 726.00 in Western Asset Municipal on September 15, 2024 and sell it today you would earn a total of 1.00 from holding Western Asset Municipal or generate 0.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Western Asset Municipal vs. Clearbridge Sustainability
Performance |
| Timeline |
| Western Asset Municipal |
| Clearbridge Sustainability |
Western Asset and Clearbridge Sustainability Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Asset and Clearbridge Sustainability
The main advantage of trading using opposite Western Asset and Clearbridge Sustainability positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Asset position performs unexpectedly, Clearbridge Sustainability 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 Clearbridge Sustainability will offset losses from the drop in Clearbridge Sustainability'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 |
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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