Correlation Between Multimanager Lifestyle and Western Asset

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

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

Diversification Opportunities for Multimanager Lifestyle and Western Asset

0.8

Correlation Coefficient

Multimanager Lifestyle  Western Asset

Very poor diversification

The 3 months correlation between MULTIMANAGER and Western is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Multimanager Lifestyle Aggress and Western Asset High in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Asset High and Multimanager Lifestyle 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 Multimanager Lifestyle Aggressive 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 High has no effect on the direction of Multimanager Lifestyle i.e., Multimanager Lifestyle and Western Asset go up and down completely randomly.

Pair Corralation between Multimanager Lifestyle and Western Asset

Assuming the 90 days horizon Multimanager Lifestyle Aggressive is expected to generate 3.79 times more return on investment than Western Asset. However, Multimanager Lifestyle is 3.79 times more volatile than Western Asset High. It trades about 0.15 of its potential returns per unit of risk. Western Asset High is currently generating about 0.2 per unit of risk. If you would invest  1,464  in Multimanager Lifestyle Aggressive on September 3, 2024 and sell it today you would earn a total of  93.00  from holding Multimanager Lifestyle Aggressive or generate 6.35% return on investment over 90 days.

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

Multimanager Lifestyle Aggress  vs.  Western Asset High

Multimanager Lifestyle

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Multimanager Lifestyle Aggressive are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Multimanager Lifestyle is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Western Asset High

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Western Asset High are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Western Asset is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Multimanager Lifestyle and Western Asset

The main advantage of trading using opposite Multimanager Lifestyle and Western Asset positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Multimanager Lifestyle 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 Multimanager Lifestyle Aggressive and Western Asset High 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.