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 Income, 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
0.05 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Western and American is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset Diversified and American Funds Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Funds Income 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 Income 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 Diversified is expected to generate 0.89 times more return on investment than American Funds. However, Western Asset Diversified is 1.13 times less risky than American Funds. It trades about -0.03 of its potential returns per unit of risk. American Funds Income is currently generating about -0.04 per unit of risk. If you would invest 1,560 in Western Asset Diversified on September 13, 2024 and sell it today you would lose (6.00) from holding Western Asset Diversified or give up 0.38% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 97.67% |
| Values | Daily Returns |
Western Asset Diversified vs. American Funds Income
Performance |
| Timeline |
| Western Asset Diversified |
| American Funds Income |
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. Royce Global Financial | American Funds vs. 1919 Financial Services | American Funds vs. Prudential Jennison Financial | American Funds vs. Transamerica Financial Life |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
Other Complementary Tools
| Idea Analyzer Analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas | |
| Price Transformation Use Price Transformation models to analyze the depth of different equity instruments across global markets | |
| Investing Opportunities Build portfolios using our predefined set of ideas and optimize them against your investing preferences | |
| Fundamentals Comparison Compare fundamentals across multiple equities to find investing opportunities | |
| Latest Portfolios Quick portfolio dashboard that showcases your latest portfolios |