Correlation Between Western Asset and Touchstone Large
Can any of the company-specific risk be diversified away by investing in both Western Asset and Touchstone Large 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 Touchstone Large 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 Touchstone Large Cap, you can compare the effects of market volatilities on Western Asset and Touchstone Large 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 Touchstone Large. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Asset and Touchstone Large.
Diversification Opportunities for Western Asset and Touchstone Large
0.48 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Western and Touchstone is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset Municipal and Touchstone Large Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Touchstone 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 Touchstone Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Touchstone Large Cap has no effect on the direction of Western Asset i.e., Western Asset and Touchstone Large go up and down completely randomly.
Pair Corralation between Western Asset and Touchstone Large
Assuming the 90 days horizon Western Asset Municipal is expected to under-perform the Touchstone Large. But the mutual fund apears to be less risky and, when comparing its historical volatility, Western Asset Municipal is 2.64 times less risky than Touchstone Large. The mutual fund trades about -0.12 of its potential returns per unit of risk. The Touchstone Large Cap is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest 1,961 in Touchstone Large Cap on October 7, 2024 and sell it today you would lose (22.00) from holding Touchstone Large Cap or give up 1.12% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Western Asset Municipal vs. Touchstone Large Cap
Performance |
| Timeline |
| Western Asset Municipal |
| Touchstone Large Cap |
Western Asset and Touchstone Large Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Asset and Touchstone Large
The main advantage of trading using opposite Western Asset and Touchstone Large positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Asset position performs unexpectedly, Touchstone Large 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 Touchstone Large will offset losses from the drop in Touchstone Large's long position.| Western Asset vs. Tekla Healthcare Investors | Western Asset vs. Health Care Ultrasector | Western Asset vs. The Hartford Healthcare | Western Asset vs. Blackrock Health Sciences |
| Touchstone Large vs. Fidelity Small Cap | Touchstone Large vs. Vanguard Small Cap Value | Touchstone Large vs. Small Cap Value | Touchstone Large vs. Ultramid Cap Profund Ultramid Cap |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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