Correlation Between Eaton Vance and Western Asset

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

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

Diversification Opportunities for Eaton Vance and Western Asset

0.91

Correlation Coefficient

Eaton Vance  Western Asset

Almost no diversification

The 3 months correlation between Eaton and Western is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Eaton Vance Municipal and Western Asset Managed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Asset Managed and Eaton Vance 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 Eaton Vance Municipal are associated (or correlated) with Western Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Asset Managed has no effect on the direction of Eaton Vance i.e., Eaton Vance and Western Asset go up and down completely randomly.

Pair Corralation between Eaton Vance and Western Asset

Considering the 90-day investment horizon Eaton Vance Municipal is expected to generate 1.02 times more return on investment than Western Asset. However, Eaton Vance is 1.02 times more volatile than Western Asset Managed. It trades about 0.06 of its potential returns per unit of risk. Western Asset Managed is currently generating about 0.05 per unit of risk. If you would invest  902.00  in Eaton Vance Municipal on November 29, 2024 and sell it today you would earn a total of  172.00  from holding Eaton Vance Municipal or generate 19.07% return on investment over 90 days.

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

Eaton Vance Municipal  vs.  Western Asset Managed

Eaton Vance Municipal

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Eaton Vance Municipal are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Eaton Vance is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Western Asset Managed

Risk-Adjusted Performance

Very Weak

Over the last 90 days Western Asset Managed has generated negative risk-adjusted returns adding no value to fund investors. In spite of comparatively stable primary indicators, Western Asset is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Eaton Vance and Western Asset

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

The idea behind Eaton Vance Municipal and Western Asset Managed 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.

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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.