Correlation Between Western Asset and Smallcap Growth
Can any of the company-specific risk be diversified away by investing in both Western Asset and Smallcap Growth 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 Smallcap Growth 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 Smallcap Growth Fund, you can compare the effects of market volatilities on Western Asset and Smallcap Growth 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 Smallcap Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Asset and Smallcap Growth.
Diversification Opportunities for Western Asset and Smallcap Growth
-0.49 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Western and Smallcap is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset Diversified and Smallcap Growth Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Smallcap Growth 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 Smallcap Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Smallcap Growth has no effect on the direction of Western Asset i.e., Western Asset and Smallcap Growth go up and down completely randomly.
Pair Corralation between Western Asset and Smallcap Growth
Assuming the 90 days horizon Western Asset is expected to generate 12.16 times less return on investment than Smallcap Growth. But when comparing it to its historical volatility, Western Asset Diversified is 3.26 times less risky than Smallcap Growth. It trades about 0.02 of its potential returns per unit of risk. Smallcap Growth Fund is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 1,269 in Smallcap Growth Fund on August 24, 2024 and sell it today you would earn a total of 438.00 from holding Smallcap Growth Fund or generate 34.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Western Asset Diversified vs. Smallcap Growth Fund
Performance |
| Timeline |
| Western Asset Diversified |
| Smallcap Growth |
Western Asset and Smallcap Growth Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Asset and Smallcap Growth
The main advantage of trading using opposite Western Asset and Smallcap Growth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Asset position performs unexpectedly, Smallcap Growth 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 Smallcap Growth will offset losses from the drop in Smallcap Growth's long position.| Western Asset vs. Dreyfusstandish Global Fixed | Western Asset vs. Ms Global Fixed | Western Asset vs. Us Vector Equity | Western Asset vs. Small Cap Equity |
| Smallcap Growth vs. Extended Market Index | Smallcap Growth vs. Siit Emerging Markets | Smallcap Growth vs. Artisan Emerging Markets | Smallcap Growth vs. Western Asset Diversified |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
Other Complementary Tools
| Money Flow Index Determine momentum by analyzing Money Flow Index and other technical indicators | |
| Portfolio Anywhere Track or share privately all of your investments from the convenience of any device | |
| Instant Ratings Determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
| Portfolio Volatility Check portfolio volatility and analyze historical return density to properly model market risk | |
| Share Portfolio Track or share privately all of your investments from the convenience of any device |