Correlation Between Western Asset and Midcap Fund
Can any of the company-specific risk be diversified away by investing in both Western Asset and Midcap Fund 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 Midcap Fund 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 Midcap Fund Class, you can compare the effects of market volatilities on Western Asset and Midcap Fund 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 Midcap Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Asset and Midcap Fund.
Diversification Opportunities for Western Asset and Midcap Fund
-0.6 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Western and Midcap is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset Municipal and Midcap Fund Class in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Midcap Fund Class 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 Midcap Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Midcap Fund Class has no effect on the direction of Western Asset i.e., Western Asset and Midcap Fund go up and down completely randomly.
Pair Corralation between Western Asset and Midcap Fund
Assuming the 90 days horizon Western Asset is expected to generate 26.07 times less return on investment than Midcap Fund. But when comparing it to its historical volatility, Western Asset Municipal is 3.38 times less risky than Midcap Fund. It trades about 0.02 of its potential returns per unit of risk. Midcap Fund Class is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 3,651 in Midcap Fund Class on September 4, 2024 and sell it today you would earn a total of 1,090 from holding Midcap Fund Class or generate 29.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Western Asset Municipal vs. Midcap Fund Class
Performance |
| Timeline |
| Western Asset Municipal |
| Midcap Fund Class |
Western Asset and Midcap Fund Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Asset and Midcap Fund
The main advantage of trading using opposite Western Asset and Midcap Fund positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Asset position performs unexpectedly, Midcap Fund 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 Midcap Fund will offset losses from the drop in Midcap Fund's long position.| Western Asset vs. Icon Natural Resources | Western Asset vs. Invesco Energy Fund | Western Asset vs. Dreyfus Natural Resources | Western Asset vs. Gmo Resources |
| Midcap Fund vs. Western Asset Municipal | Midcap Fund vs. Qs Large Cap | Midcap Fund vs. Falcon Focus Scv | Midcap Fund vs. Sei Daily Income |
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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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