Correlation Between Western Asset and Midcap Fund
Can any of the company-specific risk be diversified away by investing in both Western Asset and Midcap Fund 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 Midcap Fund 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 Midcap Fund Institutional, you can compare the effects of market volatilities on Western Asset and Midcap Fund 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 Midcap Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Asset and Midcap Fund.
Diversification Opportunities for Western Asset and Midcap Fund
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Western and Midcap is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset Diversified and Midcap Fund Institutional in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Midcap Fund Institutional 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 Midcap Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Midcap Fund Institutional has no effect on the direction of Western Asset i.e., Western Asset and Midcap Fund go up and down completely randomly.
Pair Corralation between Western Asset and Midcap Fund
Assuming the 90 days horizon Western Asset Diversified is expected to under-perform the Midcap Fund. But the mutual fund apears to be less risky and, when comparing its historical volatility, Western Asset Diversified is 2.6 times less risky than Midcap Fund. The mutual fund trades about -0.05 of its potential returns per unit of risk. The Midcap Fund Institutional is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 4,444 in Midcap Fund Institutional on October 20, 2024 and sell it today you would earn a total of 111.00 from holding Midcap Fund Institutional or generate 2.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.0% |
| Values | Daily Returns |
Western Asset Diversified vs. Midcap Fund Institutional
Performance |
| Timeline |
| Western Asset Diversified |
| Midcap Fund Institutional |
Western Asset and Midcap Fund Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Asset and Midcap Fund
The main advantage of trading using opposite Western Asset and Midcap Fund positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Asset position performs unexpectedly, Midcap Fund 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 Midcap Fund will offset losses from the drop in Midcap Fund's long position.| Western Asset vs. Morningstar Defensive Bond | Western Asset vs. Doubleline Total Return | Western Asset vs. Gmo High Yield | Western Asset vs. Ambrus Core Bond |
| Midcap Fund vs. Gmo Global Equity | Midcap Fund vs. Wisdomtree Siegel Global | Midcap Fund vs. Rbc Global Equity | Midcap Fund vs. Asg Global Alternatives |
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 Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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