Correlation Between Western Asset and High Yield
Can any of the company-specific risk be diversified away by investing in both Western Asset and High Yield 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 High Yield 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 High Yield Fund, you can compare the effects of market volatilities on Western Asset and High Yield 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 High Yield. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Asset and High Yield.
Diversification Opportunities for Western Asset and High Yield
0.16 | Correlation Coefficient |
Average diversification
The 3 months correlation between Western and High is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset Municipal and High Yield Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on High Yield 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 High Yield. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of High Yield Fund has no effect on the direction of Western Asset i.e., Western Asset and High Yield go up and down completely randomly.
Pair Corralation between Western Asset and High Yield
Assuming the 90 days horizon Western Asset is expected to generate 4.46 times less return on investment than High Yield. In addition to that, Western Asset is 1.05 times more volatile than High Yield Fund. It trades about 0.03 of its total potential returns per unit of risk. High Yield Fund is currently generating about 0.16 per unit of volatility. If you would invest 706.00 in High Yield Fund on September 12, 2024 and sell it today you would earn a total of 106.00 from holding High Yield Fund or generate 15.01% 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. High Yield Fund
Performance |
| Timeline |
| Western Asset Municipal |
| High Yield Fund |
Western Asset and High Yield Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Asset and High Yield
The main advantage of trading using opposite Western Asset and High Yield positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Asset position performs unexpectedly, High Yield 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 High Yield will offset losses from the drop in High Yield's long position.| Western Asset vs. Barings Active Short | Western Asset vs. Cmg Ultra Short | Western Asset vs. Blackrock Short Term Inflat Protected | Western Asset vs. Rbc Short Duration |
| High Yield vs. Franklin High Yield | High Yield vs. Pace High Yield | High Yield vs. Morningstar Defensive Bond | High Yield 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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