Correlation Between Western Asset and Real Estate
Can any of the company-specific risk be diversified away by investing in both Western Asset and Real Estate 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 Real Estate 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 Real Estate Ultrasector, you can compare the effects of market volatilities on Western Asset and Real Estate 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 Real Estate. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Asset and Real Estate.
Diversification Opportunities for Western Asset and Real Estate
0.55 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Western and Real is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset Diversified and Real Estate Ultrasector in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Real Estate Ultrasector 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 Real Estate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Real Estate Ultrasector has no effect on the direction of Western Asset i.e., Western Asset and Real Estate go up and down completely randomly.
Pair Corralation between Western Asset and Real Estate
Assuming the 90 days horizon Western Asset Diversified is expected to generate 0.21 times more return on investment than Real Estate. However, Western Asset Diversified is 4.81 times less risky than Real Estate. It trades about 0.05 of its potential returns per unit of risk. Real Estate Ultrasector is currently generating about -0.06 per unit of risk. If you would invest 1,549 in Western Asset Diversified on September 12, 2024 and sell it today you would earn a total of 4.00 from holding Western Asset Diversified or generate 0.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Western Asset Diversified vs. Real Estate Ultrasector
Performance |
| Timeline |
| Western Asset Diversified |
| Real Estate Ultrasector |
Western Asset and Real Estate Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Asset and Real Estate
The main advantage of trading using opposite Western Asset and Real Estate positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Asset position performs unexpectedly, Real Estate 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 Real Estate will offset losses from the drop in Real Estate'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 |
| Real Estate vs. Wasatch Small Cap | Real Estate vs. Pgim Jennison Diversified | Real Estate vs. Sentinel Small Pany | Real Estate 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
Other Complementary Tools
| Stock Screener Find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook. | |
| Portfolio Volatility Check portfolio volatility and analyze historical return density to properly model market risk | |
| Piotroski F Score Get Piotroski F Score based on the binary analysis strategy of nine different fundamentals | |
| Portfolio Anywhere Track or share privately all of your investments from the convenience of any device | |
| Commodity Directory Find actively traded commodities issued by global exchanges |