Correlation Between Western Asset and Fulcrum Diversified
Can any of the company-specific risk be diversified away by investing in both Western Asset and Fulcrum Diversified 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 Fulcrum Diversified 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 Fulcrum Diversified Absolute, you can compare the effects of market volatilities on Western Asset and Fulcrum Diversified 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 Fulcrum Diversified. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Asset and Fulcrum Diversified.
Diversification Opportunities for Western Asset and Fulcrum Diversified
-0.39 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Western and Fulcrum is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset Diversified and Fulcrum Diversified Absolute in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fulcrum Diversified 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 Fulcrum Diversified. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fulcrum Diversified has no effect on the direction of Western Asset i.e., Western Asset and Fulcrum Diversified go up and down completely randomly.
Pair Corralation between Western Asset and Fulcrum Diversified
Assuming the 90 days horizon Western Asset Diversified is expected to generate 0.27 times more return on investment than Fulcrum Diversified. However, Western Asset Diversified is 3.64 times less risky than Fulcrum Diversified. It trades about 0.05 of its potential returns per unit of risk. Fulcrum Diversified Absolute is currently generating about -0.17 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 Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Western Asset Diversified vs. Fulcrum Diversified Absolute
Performance |
| Timeline |
| Western Asset Diversified |
| Fulcrum Diversified |
Western Asset and Fulcrum Diversified Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Asset and Fulcrum Diversified
The main advantage of trading using opposite Western Asset and Fulcrum Diversified positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Asset position performs unexpectedly, Fulcrum Diversified 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 Fulcrum Diversified will offset losses from the drop in Fulcrum Diversified'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 Transaction History module to view history of all your transactions and understand their impact on performance.
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