Correlation Between Western Asset and Inverse Mid
Can any of the company-specific risk be diversified away by investing in both Western Asset and Inverse Mid 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 Inverse Mid 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 Inverse Mid Cap Strategy, you can compare the effects of market volatilities on Western Asset and Inverse Mid 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 Inverse Mid. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Asset and Inverse Mid.
Diversification Opportunities for Western Asset and Inverse Mid
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Western and Inverse is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset Diversified and Inverse Mid Cap Strategy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inverse Mid Cap 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 Inverse Mid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Inverse Mid Cap has no effect on the direction of Western Asset i.e., Western Asset and Inverse Mid go up and down completely randomly.
Pair Corralation between Western Asset and Inverse Mid
Assuming the 90 days horizon Western Asset Diversified is expected to generate 0.31 times more return on investment than Inverse Mid. However, Western Asset Diversified is 3.25 times less risky than Inverse Mid. It trades about 0.03 of its potential returns per unit of risk. Inverse Mid Cap Strategy is currently generating about -0.03 per unit of risk. If you would invest 1,486 in Western Asset Diversified on September 13, 2024 and sell it today you would earn a total of 68.00 from holding Western Asset Diversified or generate 4.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.8% |
| Values | Daily Returns |
Western Asset Diversified vs. Inverse Mid Cap Strategy
Performance |
| Timeline |
| Western Asset Diversified |
| Inverse Mid Cap |
Western Asset and Inverse Mid Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Asset and Inverse Mid
The main advantage of trading using opposite Western Asset and Inverse Mid positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Asset position performs unexpectedly, Inverse Mid 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 Inverse Mid will offset losses from the drop in Inverse Mid'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 |
| Inverse Mid vs. Dreyfus Technology Growth | Inverse Mid vs. Icon Information Technology | Inverse Mid vs. Vanguard Information Technology | Inverse Mid vs. Janus Global Technology |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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