Correlation Between Western Asset and Lifex Income

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

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

Diversification Opportunities for Western Asset and Lifex Income

0.0

Correlation Coefficient

Western Asset  Lifex Income

Pay attention - limited upside

The 3 months correlation between Western and Lifex is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset Smash and Lifex Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lifex Income 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 Smash are associated (or correlated) with Lifex Income. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lifex Income has no effect on the direction of Western Asset i.e., Western Asset and Lifex Income go up and down completely randomly.

Pair Corralation between Western Asset and Lifex Income

Assuming the 90 days horizon Western Asset Smash is expected to under-perform the Lifex Income. But the mutual fund apears to be less risky and, when comparing its historical volatility, Western Asset Smash is 1.26 times less risky than Lifex Income. The mutual fund trades about -0.01 of its potential returns per unit of risk. The Lifex Income is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  1,908  in Lifex Income on October 7, 2024 and sell it today you would lose (19.00) from holding Lifex Income or give up 1.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	49.19%
Values	Daily Returns

Western Asset Smash  vs.  Lifex Income

Western Asset Smash

Risk-Adjusted Performance

0 of 100

Very Weak

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

Lifex Income

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Western Asset and Lifex Income

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

The idea behind Western Asset Smash and Lifex Income 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.