Correlation Between Western Asset and All Asset
Can any of the company-specific risk be diversified away by investing in both Western Asset and All Asset 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 All Asset 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 All Asset Fund, you can compare the effects of market volatilities on Western Asset and All Asset 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 All Asset. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Asset and All Asset.
Diversification Opportunities for Western Asset and All Asset
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Western and All is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset Diversified and All Asset Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on All Asset Fund 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 All Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of All Asset Fund has no effect on the direction of Western Asset i.e., Western Asset and All Asset go up and down completely randomly.
Pair Corralation between Western Asset and All Asset
Assuming the 90 days horizon Western Asset is expected to generate 2.28 times less return on investment than All Asset. But when comparing it to its historical volatility, Western Asset Diversified is 1.22 times less risky than All Asset. It trades about 0.11 of its potential returns per unit of risk. All Asset Fund is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest 1,118 in All Asset Fund on September 13, 2024 and sell it today you would earn a total of 15.00 from holding All Asset Fund or generate 1.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Western Asset Diversified vs. All Asset Fund
Performance |
| Timeline |
| Western Asset Diversified |
| All Asset Fund |
Western Asset and All Asset Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Asset and All Asset
The main advantage of trading using opposite Western Asset and All Asset positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Asset position performs unexpectedly, All Asset 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 All Asset will offset losses from the drop in All Asset'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 |
| All Asset vs. Pace Smallmedium Growth | All Asset vs. Artisan Small Cap | All Asset vs. L Abbett Growth | All Asset vs. Qs Growth 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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