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 R 3, 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
-0.51 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Western and Midcap is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset Municipal and Midcap Fund R 3 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Midcap Fund R 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 R 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 Municipal is expected to generate 0.27 times more return on investment than Midcap Fund. However, Western Asset Municipal is 3.73 times less risky than Midcap Fund. It trades about 0.23 of its potential returns per unit of risk. Midcap Fund R 3 is currently generating about -0.02 per unit of risk. If you would invest 726.00 in Western Asset Municipal on September 12, 2024 and sell it today you would earn a total of 7.00 from holding Western Asset Municipal or generate 0.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Western Asset Municipal vs. Midcap Fund R 3
Performance |
| Timeline |
| Western Asset Municipal |
| Midcap Fund R |
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. Barings Active Short | Western Asset vs. Cmg Ultra Short | Western Asset vs. Blackrock Short Term Inflat Protected | Western Asset vs. Rbc Short Duration |
| Midcap Fund vs. Western Asset Municipal | Midcap Fund vs. Volumetric Fund Volumetric | Midcap Fund vs. Red Oak Technology | Midcap Fund vs. Leggmason Partners Institutional |
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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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