Correlation Between Western Asset and Eaton Vance

Can any of the company-specific risk be diversified away by investing in both Western Asset and Eaton Vance 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 Eaton Vance into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Western Asset Global and Eaton Vance Enhanced, you can compare the effects of market volatilities on Western Asset and Eaton Vance 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 Eaton Vance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Asset and Eaton Vance.

Diversification Opportunities for Western Asset and Eaton Vance

-0.42

Correlation Coefficient

Western Asset  Eaton Vance

Very good diversification

The 3 months correlation between Western and Eaton is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset Global and Eaton Vance Enhanced in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eaton Vance Enhanced 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 Global are associated (or correlated) with Eaton Vance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eaton Vance Enhanced has no effect on the direction of Western Asset i.e., Western Asset and Eaton Vance go up and down completely randomly.

Pair Corralation between Western Asset and Eaton Vance

Considering the 90-day investment horizon Western Asset is expected to generate 8.34 times less return on investment than Eaton Vance. But when comparing it to its historical volatility, Western Asset Global is 1.11 times less risky than Eaton Vance. It trades about 0.04 of its potential returns per unit of risk. Eaton Vance Enhanced is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest  2,044  in Eaton Vance Enhanced on September 5, 2024 and sell it today you would earn a total of  322.00  from holding Eaton Vance Enhanced or generate 15.75% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Western Asset Global  vs.  Eaton Vance Enhanced

Western Asset Global

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Western Asset Global are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. Despite fairly strong technical indicators, Western Asset is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Eaton Vance Enhanced

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Eaton Vance Enhanced are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent basic indicators, Eaton Vance unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Western Asset and Eaton Vance

The main advantage of trading using opposite Western Asset and Eaton Vance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Asset position performs unexpectedly, Eaton Vance 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 Eaton Vance will offset losses from the drop in Eaton Vance's long position.

The idea behind Western Asset Global and Eaton Vance Enhanced pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.