Correlation Between Western Asset and Vanguard Institutional
Can any of the company-specific risk be diversified away by investing in both Western Asset and Vanguard Institutional 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 Vanguard Institutional 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 Vanguard Institutional Short Term, you can compare the effects of market volatilities on Western Asset and Vanguard Institutional 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 Vanguard Institutional. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Asset and Vanguard Institutional.
Diversification Opportunities for Western Asset and Vanguard Institutional
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Western and Vanguard is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset Municipal and Vanguard Institutional Short T in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Institutional 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 Vanguard Institutional. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Institutional has no effect on the direction of Western Asset i.e., Western Asset and Vanguard Institutional go up and down completely randomly.
Pair Corralation between Western Asset and Vanguard Institutional
Assuming the 90 days horizon Western Asset Municipal is expected to under-perform the Vanguard Institutional. In addition to that, Western Asset is 2.34 times more volatile than Vanguard Institutional Short Term. It trades about 0.0 of its total potential returns per unit of risk. Vanguard Institutional Short Term is currently generating about 0.21 per unit of volatility. If you would invest 1,285 in Vanguard Institutional Short Term on September 13, 2024 and sell it today you would earn a total of 37.00 from holding Vanguard Institutional Short Term or generate 2.88% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Western Asset Municipal vs. Vanguard Institutional Short T
Performance |
| Timeline |
| Western Asset Municipal |
| Vanguard Institutional |
Western Asset and Vanguard Institutional Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Asset and Vanguard Institutional
The main advantage of trading using opposite Western Asset and Vanguard Institutional positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Asset position performs unexpectedly, Vanguard Institutional 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 Vanguard Institutional will offset losses from the drop in Vanguard Institutional'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 |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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