Correlation Between Western Asset and Real Estate

Specify exactly 2 symbols:
Can any of the company-specific risk be diversified away by investing in both Western Asset and Real Estate 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 Real Estate 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 Real Estate Securities, you can compare the effects of market volatilities on Western Asset and Real Estate 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 Real Estate. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Asset and Real Estate.

Diversification Opportunities for Western Asset and Real Estate

0.56
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Western and Real is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset Municipal and Real Estate Securities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Real Estate Securities 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 Real Estate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Real Estate Securities has no effect on the direction of Western Asset i.e., Western Asset and Real Estate go up and down completely randomly.

Pair Corralation between Western Asset and Real Estate

Assuming the 90 days horizon Western Asset is expected to generate 1.98 times less return on investment than Real Estate. But when comparing it to its historical volatility, Western Asset Municipal is 2.54 times less risky than Real Estate. It trades about 0.09 of its potential returns per unit of risk. Real Estate Securities is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  3,050  in Real Estate Securities on August 31, 2024 and sell it today you would earn a total of  40.00  from holding Real Estate Securities or generate 1.31% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Western Asset Municipal  vs.  Real Estate Securities

 Performance 
       Timeline  
Western Asset Municipal 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Western Asset Municipal has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Western Asset is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
Real Estate Securities 

Risk-Adjusted Performance

3 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Real Estate Securities are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Real Estate is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Western Asset and Real Estate Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Western Asset and Real Estate

The main advantage of trading using opposite Western Asset and Real Estate positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Asset position performs unexpectedly, Real Estate 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 Real Estate will offset losses from the drop in Real Estate's long position.
The idea behind Western Asset Municipal and Real Estate Securities pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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 Valuation module to check real value of public entities based on technical and fundamental data.

Other Complementary Tools

Portfolio Manager
State of the art Portfolio Manager to monitor and improve performance of your invested capital
AI Portfolio Architect
Use AI to generate optimal portfolios and find profitable investment opportunities
Share Portfolio
Track or share privately all of your investments from the convenience of any device
My Watchlist Analysis
Analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like
Stock Tickers
Use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites