Correlation Between Western Asset and Financials Ultrasector
Can any of the company-specific risk be diversified away by investing in both Western Asset and Financials Ultrasector 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 Financials Ultrasector 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 Financials Ultrasector Profund, you can compare the effects of market volatilities on Western Asset and Financials Ultrasector 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 Financials Ultrasector. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Asset and Financials Ultrasector.
Diversification Opportunities for Western Asset and Financials Ultrasector
-0.73 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Western and Financials is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset Diversified and Financials Ultrasector Profund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Financials Ultrasector 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 Financials Ultrasector. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Financials Ultrasector has no effect on the direction of Western Asset i.e., Western Asset and Financials Ultrasector go up and down completely randomly.
Pair Corralation between Western Asset and Financials Ultrasector
Assuming the 90 days horizon Western Asset is expected to generate 29.12 times less return on investment than Financials Ultrasector. But when comparing it to its historical volatility, Western Asset Diversified is 3.87 times less risky than Financials Ultrasector. It trades about 0.01 of its potential returns per unit of risk. Financials Ultrasector Profund is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 2,655 in Financials Ultrasector Profund on September 3, 2024 and sell it today you would earn a total of 1,975 from holding Financials Ultrasector Profund or generate 74.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Western Asset Diversified vs. Financials Ultrasector Profund
Performance |
| Timeline |
| Western Asset Diversified |
| Financials Ultrasector |
Western Asset and Financials Ultrasector Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Asset and Financials Ultrasector
The main advantage of trading using opposite Western Asset and Financials Ultrasector positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Asset position performs unexpectedly, Financials Ultrasector 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 Financials Ultrasector will offset losses from the drop in Financials Ultrasector'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 |
| Financials Ultrasector vs. American Century Etf | Financials Ultrasector vs. Boston Partners Small | Financials Ultrasector vs. Heartland Value Plus | Financials Ultrasector vs. Royce Opportunity Fund |
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 Stocks Directory module to find actively traded stocks across global markets.
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