Correlation Between Western Asset and Real Estate
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 Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Western Asset Municipal vs. Real Estate Securities
Performance |
Timeline |
Western Asset Municipal |
Real Estate Securities |
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.Western Asset vs. T Rowe Price | Western Asset vs. California Bond Fund | Western Asset vs. Blrc Sgy Mnp | Western Asset vs. Legg Mason Partners |
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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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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