Correlation Between Western Asset and Transamerica International
Can any of the company-specific risk be diversified away by investing in both Western Asset and Transamerica International 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 Transamerica International 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 Transamerica International Stock, you can compare the effects of market volatilities on Western Asset and Transamerica International 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 Transamerica International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Asset and Transamerica International.
Diversification Opportunities for Western Asset and Transamerica International
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Western and Transamerica is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset Diversified and Transamerica International Sto in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transamerica International 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 Transamerica International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transamerica International has no effect on the direction of Western Asset i.e., Western Asset and Transamerica International go up and down completely randomly.
Pair Corralation between Western Asset and Transamerica International
Assuming the 90 days horizon Western Asset Diversified is expected to generate 0.34 times more return on investment than Transamerica International. However, Western Asset Diversified is 2.9 times less risky than Transamerica International. It trades about -0.03 of its potential returns per unit of risk. Transamerica International Stock is currently generating about -0.04 per unit of risk. If you would invest 1,560 in Western Asset Diversified on September 13, 2024 and sell it today you would lose (6.00) from holding Western Asset Diversified or give up 0.38% 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. Transamerica International Sto
Performance |
| Timeline |
| Western Asset Diversified |
| Transamerica International |
Western Asset and Transamerica International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Asset and Transamerica International
The main advantage of trading using opposite Western Asset and Transamerica International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Asset position performs unexpectedly, Transamerica International 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 Transamerica International will offset losses from the drop in Transamerica International'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 |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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