Correlation Between Western Asset and Multisector Bond
Can any of the company-specific risk be diversified away by investing in both Western Asset and Multisector 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 Multisector 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 Multisector Bond Sma, you can compare the effects of market volatilities on Western Asset and Multisector 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 Multisector Bond. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Asset and Multisector Bond.
Diversification Opportunities for Western Asset and Multisector Bond
0.37 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Western and Multisector is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset Municipal and Multisector Bond Sma in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Multisector Bond Sma 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 Multisector Bond. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Multisector Bond Sma has no effect on the direction of Western Asset i.e., Western Asset and Multisector Bond go up and down completely randomly.
Pair Corralation between Western Asset and Multisector Bond
Assuming the 90 days horizon Western Asset Municipal is expected to under-perform the Multisector Bond. But the mutual fund apears to be less risky and, when comparing its historical volatility, Western Asset Municipal is 1.64 times less risky than Multisector Bond. The mutual fund trades about 0.0 of its potential returns per unit of risk. The Multisector Bond Sma is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 1,108 in Multisector Bond Sma on November 1, 2024 and sell it today you would earn a total of 255.00 from holding Multisector Bond Sma or generate 23.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Western Asset Municipal vs. Multisector Bond Sma
Performance |
| Timeline |
| Western Asset Municipal |
| Multisector Bond Sma |
Western Asset and Multisector Bond Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Asset and Multisector Bond
The main advantage of trading using opposite Western Asset and Multisector Bond positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Asset position performs unexpectedly, Multisector 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 Multisector Bond will offset losses from the drop in Multisector Bond's long position.| Western Asset vs. Alphacentric Lifesci Healthcare | Western Asset vs. Alger Health Sciences | Western Asset vs. Baillie Gifford Health | Western Asset vs. Eventide Healthcare Life |
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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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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