Correlation Between Western Asset and Mesirow Financial
Can any of the company-specific risk be diversified away by investing in both Western Asset and Mesirow Financial 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 Mesirow Financial 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 Mesirow Financial Small, you can compare the effects of market volatilities on Western Asset and Mesirow Financial 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 Mesirow Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Asset and Mesirow Financial.
Diversification Opportunities for Western Asset and Mesirow Financial
0.25 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Western and Mesirow is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset Municipal and Mesirow Financial Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mesirow Financial Small 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 Mesirow Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mesirow Financial Small has no effect on the direction of Western Asset i.e., Western Asset and Mesirow Financial go up and down completely randomly.
Pair Corralation between Western Asset and Mesirow Financial
Assuming the 90 days horizon Western Asset Municipal is expected to generate 0.12 times more return on investment than Mesirow Financial. However, Western Asset Municipal is 8.24 times less risky than Mesirow Financial. It trades about -0.24 of its potential returns per unit of risk. Mesirow Financial Small is currently generating about -0.26 per unit of risk. If you would invest 724.00 in Western Asset Municipal on September 25, 2024 and sell it today you would lose (10.00) from holding Western Asset Municipal or give up 1.38% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.24% |
| Values | Daily Returns |
Western Asset Municipal vs. Mesirow Financial Small
Performance |
| Timeline |
| Western Asset Municipal |
| Mesirow Financial Small |
Western Asset and Mesirow Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Asset and Mesirow Financial
The main advantage of trading using opposite Western Asset and Mesirow Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Asset position performs unexpectedly, Mesirow Financial 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 Mesirow Financial will offset losses from the drop in Mesirow Financial'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 |
| Mesirow Financial vs. Mesirow Financial Small | Mesirow Financial vs. Mesirow Enhanced Core | Mesirow Financial vs. Mesirow Financial High | Mesirow Financial vs. Mesirow Financial High |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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