Correlation Between Western Asset and American Funds
Can any of the company-specific risk be diversified away by investing in both Western Asset and American Funds 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 American Funds 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 American Funds 2060, you can compare the effects of market volatilities on Western Asset and American Funds 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 American Funds. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Asset and American Funds.
Diversification Opportunities for Western Asset and American Funds
-0.37 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Western and American is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset Diversified and American Funds 2060 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Funds 2060 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 American Funds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Funds 2060 has no effect on the direction of Western Asset i.e., Western Asset and American Funds go up and down completely randomly.
Pair Corralation between Western Asset and American Funds
Assuming the 90 days horizon Western Asset is expected to generate 1.4 times less return on investment than American Funds. But when comparing it to its historical volatility, Western Asset Diversified is 2.1 times less risky than American Funds. It trades about 0.16 of its potential returns per unit of risk. American Funds 2060 is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 1,810 in American Funds 2060 on September 14, 2024 and sell it today you would earn a total of 21.00 from holding American Funds 2060 or generate 1.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Western Asset Diversified vs. American Funds 2060
Performance |
| Timeline |
| Western Asset Diversified |
| American Funds 2060 |
Western Asset and American Funds Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Asset and American Funds
The main advantage of trading using opposite Western Asset and American Funds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Asset position performs unexpectedly, American Funds 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 American Funds will offset losses from the drop in American Funds' 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 |
| American Funds vs. Western Asset Diversified | American Funds vs. Ab All Market | American Funds vs. Shelton Emerging Markets | American Funds vs. Ashmore Emerging Markets |
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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
Other Complementary Tools
| Premium Stories Follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope | |
| Companies Directory Evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals | |
| Commodity Channel Use Commodity Channel Index to analyze current equity momentum | |
| Equity Search Search for actively traded equities including funds and ETFs from over 30 global markets | |
| Analyst Advice Analyst recommendations and target price estimates broken down by several categories |