Correlation Between Western Asset and Doubleline Yield
Can any of the company-specific risk be diversified away by investing in both Western Asset and Doubleline Yield 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 Doubleline Yield 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 Doubleline Yield Opportunities, you can compare the effects of market volatilities on Western Asset and Doubleline Yield 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 Doubleline Yield. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Asset and Doubleline Yield.
Diversification Opportunities for Western Asset and Doubleline Yield
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Western and Doubleline is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset Municipal and Doubleline Yield Opportunities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Doubleline Yield Opp 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 Doubleline Yield. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Doubleline Yield Opp has no effect on the direction of Western Asset i.e., Western Asset and Doubleline Yield go up and down completely randomly.
Pair Corralation between Western Asset and Doubleline Yield
Assuming the 90 days horizon Western Asset Municipal is expected to generate about the same return on investment as Doubleline Yield Opportunities. However, Western Asset is 1.56 times more volatile than Doubleline Yield Opportunities. It trades about -0.01 of its potential returns per unit of risk. Doubleline Yield Opportunities is currently producing about -0.01 per unit of risk. If you would invest 1,634 in Doubleline Yield Opportunities on September 13, 2024 and sell it today you would lose (2.00) from holding Doubleline Yield Opportunities or give up 0.12% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Western Asset Municipal vs. Doubleline Yield Opportunities
Performance |
| Timeline |
| Western Asset Municipal |
| Doubleline Yield Opp |
Western Asset and Doubleline Yield Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Asset and Doubleline Yield
The main advantage of trading using opposite Western Asset and Doubleline Yield positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Asset position performs unexpectedly, Doubleline Yield 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 Doubleline Yield will offset losses from the drop in Doubleline Yield'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 |
| Doubleline Yield vs. Vanguard Total Stock | Doubleline Yield vs. Vanguard 500 Index | Doubleline Yield vs. Vanguard Total Stock | Doubleline Yield 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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