Correlation Between Western Asset and New World
Can any of the company-specific risk be diversified away by investing in both Western Asset and New World 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 New World 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 New World Fund, you can compare the effects of market volatilities on Western Asset and New World 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 New World. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Asset and New World.
Diversification Opportunities for Western Asset and New World
0.14 | Correlation Coefficient |
Average diversification
The 3 months correlation between Western and New is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset Municipal and New World Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New World 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 New World. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New World Fund has no effect on the direction of Western Asset i.e., Western Asset and New World go up and down completely randomly.
Pair Corralation between Western Asset and New World
Assuming the 90 days horizon Western Asset Municipal is expected to generate 0.56 times more return on investment than New World. However, Western Asset Municipal is 1.79 times less risky than New World. It trades about 0.1 of its potential returns per unit of risk. New World Fund is currently generating about -0.21 per unit of risk. If you would invest 722.00 in Western Asset Municipal on August 30, 2024 and sell it today you would earn a total of 6.00 from holding Western Asset Municipal or generate 0.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Western Asset Municipal vs. New World Fund
Performance |
| Timeline |
| Western Asset Municipal |
| New World Fund |
Western Asset and New World Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Asset and New World
The main advantage of trading using opposite Western Asset and New World positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Asset position performs unexpectedly, New World 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 New World will offset losses from the drop in New World's long position.| Western Asset vs. Ab Small Cap | Western Asset vs. Pace Smallmedium Value | Western Asset vs. Victory Rs Partners | Western Asset vs. Vanguard Small Cap Value |
| New World vs. Ab Value Fund | New World vs. Aam Select Income | New World vs. Arrow Managed Futures | New World 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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