Correlation Between Western Asset and Dimensional Retirement
Can any of the company-specific risk be diversified away by investing in both Western Asset and Dimensional Retirement 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 Dimensional Retirement 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 Dimensional Retirement Income, you can compare the effects of market volatilities on Western Asset and Dimensional Retirement 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 Dimensional Retirement. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Asset and Dimensional Retirement.
Diversification Opportunities for Western Asset and Dimensional Retirement
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Western and Dimensional is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset Diversified and Dimensional Retirement Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dimensional Retirement 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 Dimensional Retirement. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dimensional Retirement has no effect on the direction of Western Asset i.e., Western Asset and Dimensional Retirement go up and down completely randomly.
Pair Corralation between Western Asset and Dimensional Retirement
Assuming the 90 days horizon Western Asset Diversified is expected to generate 0.72 times more return on investment than Dimensional Retirement. However, Western Asset Diversified is 1.39 times less risky than Dimensional Retirement. It trades about -0.07 of its potential returns per unit of risk. Dimensional Retirement Income is currently generating about -0.18 per unit of risk. If you would invest 1,537 in Western Asset Diversified on September 23, 2024 and sell it today you would lose (5.00) from holding Western Asset Diversified or give up 0.33% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Western Asset Diversified vs. Dimensional Retirement Income
Performance |
| Timeline |
| Western Asset Diversified |
| Dimensional Retirement |
Western Asset and Dimensional Retirement Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Asset and Dimensional Retirement
The main advantage of trading using opposite Western Asset and Dimensional Retirement positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Asset position performs unexpectedly, Dimensional Retirement 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 Dimensional Retirement will offset losses from the drop in Dimensional Retirement's long position.| Western Asset vs. Virtus Nfj Large Cap | Western Asset vs. Large Cap Growth Profund | Western Asset vs. Dunham Large Cap | Western Asset vs. Touchstone Large Cap |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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