Correlation Between Western Asset and Schwab Large-cap
Can any of the company-specific risk be diversified away by investing in both Western Asset and Schwab Large-cap 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 Schwab Large-cap 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 Schwab Large Cap Growth, you can compare the effects of market volatilities on Western Asset and Schwab Large-cap 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 Schwab Large-cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Asset and Schwab Large-cap.
Diversification Opportunities for Western Asset and Schwab Large-cap
-0.15 | Correlation Coefficient |
Good diversification
The 3 months correlation between Western and Schwab is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset Municipal and Schwab Large Cap Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Schwab Large Cap 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 Schwab Large-cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Schwab Large Cap has no effect on the direction of Western Asset i.e., Western Asset and Schwab Large-cap go up and down completely randomly.
Pair Corralation between Western Asset and Schwab Large-cap
Assuming the 90 days horizon Western Asset Municipal is expected to under-perform the Schwab Large-cap. But the mutual fund apears to be less risky and, when comparing its historical volatility, Western Asset Municipal is 5.2 times less risky than Schwab Large-cap. The mutual fund trades about -0.09 of its potential returns per unit of risk. The Schwab Large Cap Growth is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 3,600 in Schwab Large Cap Growth on October 20, 2024 and sell it today you would earn a total of 9.00 from holding Schwab Large Cap Growth or generate 0.25% 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. Schwab Large Cap Growth
Performance |
| Timeline |
| Western Asset Municipal |
| Schwab Large Cap |
Western Asset and Schwab Large-cap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Asset and Schwab Large-cap
The main advantage of trading using opposite Western Asset and Schwab Large-cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Asset position performs unexpectedly, Schwab Large-cap 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 Schwab Large-cap will offset losses from the drop in Schwab Large-cap's long position.| Western Asset vs. Blrc Sgy Mnp | Western Asset vs. Metropolitan West Porate | Western Asset vs. Rbc Impact Bond | Western Asset vs. Artisan High Income |
| Schwab Large-cap vs. Fulcrum Diversified Absolute | Schwab Large-cap vs. Schwab Small Cap Index | Schwab Large-cap vs. Northern Small Cap | Schwab Large-cap vs. Jhancock Diversified Macro |
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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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