Correlation Between Western Asset and Blackrock Munivest

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

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

Diversification Opportunities for Western Asset and Blackrock Munivest

0.03

Correlation Coefficient

Western Asset  Blackrock Munivest

Significant diversification

The 3 months correlation between Western and Blackrock is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset High and Blackrock Munivest in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blackrock Munivest 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 High are associated (or correlated) with Blackrock Munivest. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Blackrock Munivest has no effect on the direction of Western Asset i.e., Western Asset and Blackrock Munivest go up and down completely randomly.

Pair Corralation between Western Asset and Blackrock Munivest

Considering the 90-day investment horizon Western Asset High is expected to generate 1.18 times more return on investment than Blackrock Munivest. However, Western Asset is 1.18 times more volatile than Blackrock Munivest. It trades about -0.01 of its potential returns per unit of risk. Blackrock Munivest is currently generating about -0.16 per unit of risk. If you would invest  434.00  in Western Asset High on September 19, 2024 and sell it today you would lose (1.00) from holding Western Asset High or give up 0.23% of portfolio value over 90 days.

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

Western Asset High  vs.  Blackrock Munivest

Western Asset High

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Western Asset High has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Western Asset is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Blackrock Munivest

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Western Asset and Blackrock Munivest

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

The idea behind Western Asset High and Blackrock Munivest 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.