Correlation Between Western Asset and State Street
Can any of the company-specific risk be diversified away by investing in both Western Asset and State Street 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 State Street 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 State Street Target, you can compare the effects of market volatilities on Western Asset and State Street 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 State Street. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Asset and State Street.
Diversification Opportunities for Western Asset and State Street
-0.36 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Western and State is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset Municipal and State Street Target in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on State Street Target 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 State Street. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of State Street Target has no effect on the direction of Western Asset i.e., Western Asset and State Street go up and down completely randomly.
Pair Corralation between Western Asset and State Street
Assuming the 90 days horizon Western Asset is expected to generate 131.67 times less return on investment than State Street. But when comparing it to its historical volatility, Western Asset Municipal is 1.75 times less risky than State Street. It trades about 0.0 of its potential returns per unit of risk. State Street Target is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 1,620 in State Street Target on August 29, 2024 and sell it today you would earn a total of 29.00 from holding State Street Target or generate 1.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Western Asset Municipal vs. State Street Target
Performance |
| Timeline |
| Western Asset Municipal |
| State Street Target |
Western Asset and State Street Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Asset and State Street
The main advantage of trading using opposite Western Asset and State Street positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Asset position performs unexpectedly, State Street 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 State Street will offset losses from the drop in State Street's long position.| Western Asset vs. Vanguard Total Stock | Western Asset vs. Vanguard 500 Index | Western Asset vs. Vanguard Total Stock | Western Asset vs. Vanguard Total Stock |
| State Street vs. T Rowe Price | State Street vs. Iaadx | State Street vs. Western Asset Municipal | State Street vs. Fa 529 Aggressive |
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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.
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