Correlation Between Vanguard Total and Western Asset

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

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

Diversification Opportunities for Vanguard Total and Western Asset

0.66

Correlation Coefficient

Vanguard Total  Western Asset

Poor diversification

The 3 months correlation between Vanguard and Western is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Total International and Western Asset Mortgage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Asset Mortgage and Vanguard Total 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 Vanguard Total International 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 Mortgage has no effect on the direction of Vanguard Total i.e., Vanguard Total and Western Asset go up and down completely randomly.

Pair Corralation between Vanguard Total and Western Asset

Assuming the 90 days horizon Vanguard Total International is expected to generate 3.93 times more return on investment than Western Asset. However, Vanguard Total is 3.93 times more volatile than Western Asset Mortgage. It trades about 0.16 of its potential returns per unit of risk. Western Asset Mortgage is currently generating about 0.13 per unit of risk. If you would invest  1,902  in Vanguard Total International on December 21, 2024 and sell it today you would earn a total of  153.00  from holding Vanguard Total International or generate 8.04% return on investment over 90 days.

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

Vanguard Total International  vs.  Western Asset Mortgage

Vanguard Total Inter

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Total International are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Vanguard Total may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Western Asset Mortgage

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Western Asset Mortgage are ranked lower than 10 (%) 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 Vanguard Total and Western Asset

The main advantage of trading using opposite Vanguard Total and Western Asset positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Total 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 Vanguard Total International and Western Asset Mortgage 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.