Correlation Between Western Asset and Baron Emerging
Can any of the company-specific risk be diversified away by investing in both Western Asset and Baron Emerging 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 Baron Emerging 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 Baron Emerging Markets, you can compare the effects of market volatilities on Western Asset and Baron Emerging 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 Baron Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Asset and Baron Emerging.
Diversification Opportunities for Western Asset and Baron Emerging
0.24 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Western and Baron is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset Diversified and Baron Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baron Emerging Markets 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 Baron Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Baron Emerging Markets has no effect on the direction of Western Asset i.e., Western Asset and Baron Emerging go up and down completely randomly.
Pair Corralation between Western Asset and Baron Emerging
Assuming the 90 days horizon Western Asset Diversified is expected to generate 0.4 times more return on investment than Baron Emerging. However, Western Asset Diversified is 2.52 times less risky than Baron Emerging. It trades about 0.05 of its potential returns per unit of risk. Baron Emerging Markets is currently generating about -0.07 per unit of risk. If you would invest 1,549 in Western Asset Diversified on September 12, 2024 and sell it today you would earn a total of 4.00 from holding Western Asset Diversified or generate 0.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Western Asset Diversified vs. Baron Emerging Markets
Performance |
| Timeline |
| Western Asset Diversified |
| Baron Emerging Markets |
Western Asset and Baron Emerging Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Asset and Baron Emerging
The main advantage of trading using opposite Western Asset and Baron Emerging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Asset position performs unexpectedly, Baron Emerging 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 Baron Emerging will offset losses from the drop in Baron Emerging'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 |
| Baron Emerging vs. Jhancock Diversified Macro | Baron Emerging vs. Western Asset Diversified | Baron Emerging vs. Small Cap Stock | Baron Emerging vs. Adams Diversified Equity |
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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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