Correlation Between Western Asset and Virtus Emerging
Can any of the company-specific risk be diversified away by investing in both Western Asset and Virtus Emerging 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 Virtus Emerging 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 Virtus Emerging Markets, you can compare the effects of market volatilities on Western Asset and Virtus Emerging 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 Virtus Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Asset and Virtus Emerging.
Diversification Opportunities for Western Asset and Virtus Emerging
0.54 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Western and Virtus is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset Diversified and Virtus Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Virtus Emerging Markets 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 Virtus Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Virtus Emerging Markets has no effect on the direction of Western Asset i.e., Western Asset and Virtus Emerging go up and down completely randomly.
Pair Corralation between Western Asset and Virtus Emerging
Assuming the 90 days horizon Western Asset Diversified is expected to generate 0.33 times more return on investment than Virtus Emerging. However, Western Asset Diversified is 3.05 times less risky than Virtus Emerging. It trades about -0.03 of its potential returns per unit of risk. Virtus Emerging Markets is currently generating about -0.12 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 | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Western Asset Diversified vs. Virtus Emerging Markets
Performance |
| Timeline |
| Western Asset Diversified |
| Virtus Emerging Markets |
Western Asset and Virtus Emerging Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Asset and Virtus Emerging
The main advantage of trading using opposite Western Asset and Virtus Emerging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Asset position performs unexpectedly, Virtus Emerging 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 Virtus Emerging will offset losses from the drop in Virtus Emerging'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 |
| Virtus Emerging vs. Investec Emerging Markets | Virtus Emerging vs. Shelton Emerging Markets | Virtus Emerging vs. Western Asset Diversified | Virtus Emerging vs. Ashmore Emerging Markets |
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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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