Correlation Between Western Asset and Intermediate-term
Can any of the company-specific risk be diversified away by investing in both Western Asset and Intermediate-term 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 Intermediate-term 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 Intermediate Term Tax Free Bond, you can compare the effects of market volatilities on Western Asset and Intermediate-term 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 Intermediate-term. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Asset and Intermediate-term.
Diversification Opportunities for Western Asset and Intermediate-term
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Western and Intermediate-term is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset Municipal and Intermediate Term Tax Free Bon in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Intermediate Term Tax 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 Intermediate-term. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Intermediate Term Tax has no effect on the direction of Western Asset i.e., Western Asset and Intermediate-term go up and down completely randomly.
Pair Corralation between Western Asset and Intermediate-term
Assuming the 90 days horizon Western Asset Municipal is expected to under-perform the Intermediate-term. In addition to that, Western Asset is 1.4 times more volatile than Intermediate Term Tax Free Bond. It trades about 0.0 of its total potential returns per unit of risk. Intermediate Term Tax Free Bond is currently generating about 0.05 per unit of volatility. If you would invest 1,025 in Intermediate Term Tax Free Bond on November 1, 2024 and sell it today you would earn a total of 47.00 from holding Intermediate Term Tax Free Bond or generate 4.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.79% |
| Values | Daily Returns |
Western Asset Municipal vs. Intermediate Term Tax Free Bon
Performance |
| Timeline |
| Western Asset Municipal |
| Intermediate Term Tax |
Western Asset and Intermediate-term Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Asset and Intermediate-term
The main advantage of trading using opposite Western Asset and Intermediate-term positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Asset position performs unexpectedly, Intermediate-term 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 Intermediate-term will offset losses from the drop in Intermediate-term's long position.| Western Asset vs. Alphacentric Lifesci Healthcare | Western Asset vs. Alger Health Sciences | Western Asset vs. Baillie Gifford Health | Western Asset vs. Eventide Healthcare Life |
| Intermediate-term vs. American Century Etf | Intermediate-term vs. Small Cap Value | Intermediate-term vs. Queens Road Small | Intermediate-term vs. Lsv Small 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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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