Correlation Between SPDR DoubleLine and Western Asset

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

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

Diversification Opportunities for SPDR DoubleLine and Western Asset

0.99

Correlation Coefficient

SPDR DoubleLine  Western Asset

No risk reduction

The 3 months correlation between SPDR and Western is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding SPDR DoubleLine Total and Western Asset Total in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Asset Total and SPDR DoubleLine 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 SPDR DoubleLine Total 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 Total has no effect on the direction of SPDR DoubleLine i.e., SPDR DoubleLine and Western Asset go up and down completely randomly.

Pair Corralation between SPDR DoubleLine and Western Asset

Given the investment horizon of 90 days SPDR DoubleLine Total is expected to under-perform the Western Asset. But the etf apears to be less risky and, when comparing its historical volatility, SPDR DoubleLine Total is 1.18 times less risky than Western Asset. The etf trades about -0.03 of its potential returns per unit of risk. The Western Asset Total is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  2,036  in Western Asset Total on September 1, 2024 and sell it today you would lose (13.00) from holding Western Asset Total or give up 0.64% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.44%
Values	Daily Returns

SPDR DoubleLine Total  vs.  Western Asset Total

SPDR DoubleLine Total

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SPDR DoubleLine Total has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, SPDR DoubleLine is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Western Asset Total

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Western Asset Total has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Western Asset is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with SPDR DoubleLine and Western Asset

The main advantage of trading using opposite SPDR DoubleLine and Western Asset positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR DoubleLine 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 SPDR DoubleLine Total and Western Asset Total 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.