Correlation Between Western Asset and New Perspective
Can any of the company-specific risk be diversified away by investing in both Western Asset and New Perspective 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 New Perspective 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 New Perspective Fund, you can compare the effects of market volatilities on Western Asset and New Perspective 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 New Perspective. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Asset and New Perspective.
Diversification Opportunities for Western Asset and New Perspective
-0.39 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Western and New is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset Municipal and New Perspective Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Perspective 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 New Perspective. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Perspective has no effect on the direction of Western Asset i.e., Western Asset and New Perspective go up and down completely randomly.
Pair Corralation between Western Asset and New Perspective
Assuming the 90 days horizon Western Asset Municipal is expected to generate 0.52 times more return on investment than New Perspective. However, Western Asset Municipal is 1.91 times less risky than New Perspective. It trades about 0.09 of its potential returns per unit of risk. New Perspective Fund is currently generating about 0.04 per unit of risk. If you would invest 723.00 in Western Asset Municipal on August 31, 2024 and sell it today you would earn a total of 5.00 from holding Western Asset Municipal or generate 0.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Western Asset Municipal vs. New Perspective Fund
Performance |
| Timeline |
| Western Asset Municipal |
| New Perspective |
Western Asset and New Perspective Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Asset and New Perspective
The main advantage of trading using opposite Western Asset and New Perspective positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Asset position performs unexpectedly, New Perspective 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 New Perspective will offset losses from the drop in New Perspective'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 |
| New Perspective vs. Locorr Market Trend | New Perspective vs. Pnc Emerging Markets | New Perspective vs. Sp Midcap Index | New Perspective vs. Transamerica Emerging Markets |
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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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