Correlation Between Western Asset and Short-term Income
Can any of the company-specific risk be diversified away by investing in both Western Asset and Short-term Income 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 Short-term Income 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 Short Term Income Fund, you can compare the effects of market volatilities on Western Asset and Short-term Income 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 Short-term Income. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Asset and Short-term Income.
Diversification Opportunities for Western Asset and Short-term Income
-0.66 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Western and Short-term is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset Diversified and Short Term Income Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Short Term 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 Short-term Income. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Short Term Income has no effect on the direction of Western Asset i.e., Western Asset and Short-term Income go up and down completely randomly.
Pair Corralation between Western Asset and Short-term Income
Assuming the 90 days horizon Western Asset Diversified is expected to under-perform the Short-term Income. In addition to that, Western Asset is 5.83 times more volatile than Short Term Income Fund. It trades about -0.04 of its total potential returns per unit of risk. Short Term Income Fund is currently generating about 0.48 per unit of volatility. If you would invest 1,001 in Short Term Income Fund on September 3, 2024 and sell it today you would earn a total of 14.00 from holding Short Term Income Fund or generate 1.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Western Asset Diversified vs. Short Term Income Fund
Performance |
| Timeline |
| Western Asset Diversified |
| Short Term Income |
Western Asset and Short-term Income Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Asset and Short-term Income
The main advantage of trading using opposite Western Asset and Short-term Income positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Asset position performs unexpectedly, Short-term Income 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 Short-term Income will offset losses from the drop in Short-term Income'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 |
| Short-term Income vs. The Fixed Income | Short-term Income vs. Scharf Fund Retail | Short-term Income vs. Cutler Equity | Short-term Income vs. Jpmorgan Equity Income |
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..
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