Correlation Between Western Asset and Specialized Technology
Can any of the company-specific risk be diversified away by investing in both Western Asset and Specialized Technology 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 Specialized Technology 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 Specialized Technology Fund, you can compare the effects of market volatilities on Western Asset and Specialized Technology 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 Specialized Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Asset and Specialized Technology.
Diversification Opportunities for Western Asset and Specialized Technology
-0.61 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Western and Specialized is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset Diversified and Specialized Technology Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Specialized Technology 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 Specialized Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Specialized Technology has no effect on the direction of Western Asset i.e., Western Asset and Specialized Technology go up and down completely randomly.
Pair Corralation between Western Asset and Specialized Technology
Assuming the 90 days horizon Western Asset is expected to generate 9.09 times less return on investment than Specialized Technology. But when comparing it to its historical volatility, Western Asset Diversified is 3.03 times less risky than Specialized Technology. It trades about 0.03 of its potential returns per unit of risk. Specialized Technology Fund is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 797.00 in Specialized Technology Fund on September 14, 2024 and sell it today you would earn a total of 437.00 from holding Specialized Technology Fund or generate 54.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Western Asset Diversified vs. Specialized Technology Fund
Performance |
| Timeline |
| Western Asset Diversified |
| Specialized Technology |
Western Asset and Specialized Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Asset and Specialized Technology
The main advantage of trading using opposite Western Asset and Specialized Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Asset position performs unexpectedly, Specialized Technology 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 Specialized Technology will offset losses from the drop in Specialized Technology'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 |
| Specialized Technology vs. M Large Cap | Specialized Technology vs. Dunham Large Cap | Specialized Technology vs. Qs Large Cap | Specialized Technology vs. Transamerica 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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