Correlation Between Western Asset and Smallcap World
Can any of the company-specific risk be diversified away by investing in both Western Asset and Smallcap World 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 World 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 World Fund, you can compare the effects of market volatilities on Western Asset and Smallcap World 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 World. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Asset and Smallcap World.
Diversification Opportunities for Western Asset and Smallcap World
-0.14 | Correlation Coefficient |
Good diversification
The 3 months correlation between Western and Smallcap is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset Diversified and Smallcap World Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Smallcap World 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 World. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Smallcap World has no effect on the direction of Western Asset i.e., Western Asset and Smallcap World go up and down completely randomly.
Pair Corralation between Western Asset and Smallcap World
Assuming the 90 days horizon Western Asset is expected to generate 10.06 times less return on investment than Smallcap World. But when comparing it to its historical volatility, Western Asset Diversified is 3.01 times less risky than Smallcap World. It trades about 0.07 of its potential returns per unit of risk. Smallcap World Fund is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest 5,805 in Smallcap World Fund on September 4, 2024 and sell it today you would earn a total of 243.00 from holding Smallcap World Fund or generate 4.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.24% |
| Values | Daily Returns |
Western Asset Diversified vs. Smallcap World Fund
Performance |
| Timeline |
| Western Asset Diversified |
| Smallcap World |
Western Asset and Smallcap World Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Asset and Smallcap World
The main advantage of trading using opposite Western Asset and Smallcap World positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Asset position performs unexpectedly, Smallcap World 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 World will offset losses from the drop in Smallcap World's long position.| Western Asset vs. Dreyfusstandish Global Fixed | Western Asset vs. Franklin Mutual Global | Western Asset vs. Commonwealth Global Fund | Western Asset vs. Scharf Global Opportunity |
| Smallcap World vs. International Investors Gold | Smallcap World vs. Vy Goldman Sachs | Smallcap World vs. Precious Metals And | Smallcap World vs. Global Gold Fund |
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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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