Correlation Between Western Asset and High-yield Fund
Can any of the company-specific risk be diversified away by investing in both Western Asset and High-yield Fund 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 High-yield Fund into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Western Asset Diversified and High Yield Fund Y, you can compare the effects of market volatilities on Western Asset and High-yield Fund 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 High-yield Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Asset and High-yield Fund.
Diversification Opportunities for Western Asset and High-yield Fund
0.11 | Correlation Coefficient |
Average diversification
The 3 months correlation between Western and HIGH-YIELD is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset Diversified and High Yield Fund Y in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on High Yield Fund 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 Diversified are associated (or correlated) with High-yield Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of High Yield Fund has no effect on the direction of Western Asset i.e., Western Asset and High-yield Fund go up and down completely randomly.
Pair Corralation between Western Asset and High-yield Fund
Assuming the 90 days horizon Western Asset Diversified is expected to under-perform the High-yield Fund. In addition to that, Western Asset is 1.42 times more volatile than High Yield Fund Y. It trades about -0.01 of its total potential returns per unit of risk. High Yield Fund Y is currently generating about 0.21 per unit of volatility. If you would invest 489.00 in High Yield Fund Y on September 5, 2024 and sell it today you would earn a total of 25.00 from holding High Yield Fund Y or generate 5.11% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Western Asset Diversified vs. High Yield Fund Y
Performance |
| Timeline |
| Western Asset Diversified |
| High Yield Fund |
Western Asset and High-yield Fund Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Asset and High-yield Fund
The main advantage of trading using opposite Western Asset and High-yield Fund positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Asset position performs unexpectedly, High-yield Fund 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 High-yield Fund will offset losses from the drop in High-yield Fund'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 |
| High-yield Fund vs. Lord Abbett Diversified | High-yield Fund vs. Oppenheimer International Diversified | High-yield Fund vs. Western Asset Diversified | High-yield Fund vs. Fidelity Advisor Diversified |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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