Correlation Between Western Asset and Virtus Multi-sector

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

By analyzing existing cross correlation between Western Asset Total and Virtus Multi Sector Short, you can compare the effects of market volatilities on Western Asset and Virtus Multi-sector 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 Virtus Multi-sector. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Asset and Virtus Multi-sector.

Diversification Opportunities for Western Asset and Virtus Multi-sector

0.43

Correlation Coefficient

Western Asset  Virtus Multi-sector

Very weak diversification

The 3 months correlation between Western and Virtus is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset Total and Virtus Multi Sector Short in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Virtus Multi Sector 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 Total are associated (or correlated) with Virtus Multi-sector. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Virtus Multi Sector has no effect on the direction of Western Asset i.e., Western Asset and Virtus Multi-sector go up and down completely randomly.

Pair Corralation between Western Asset and Virtus Multi-sector

Assuming the 90 days horizon Western Asset Total is expected to under-perform the Virtus Multi-sector. In addition to that, Western Asset is 2.43 times more volatile than Virtus Multi Sector Short. It trades about -0.11 of its total potential returns per unit of risk. Virtus Multi Sector Short is currently generating about 0.0 per unit of volatility. If you would invest  454.00  in Virtus Multi Sector Short on October 10, 2024 and sell it today you would earn a total of  0.00  from holding Virtus Multi Sector Short or generate 0.0% return on investment over 90 days.

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

Western Asset Total  vs.  Virtus Multi Sector Short

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 fund investors. 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.

Virtus Multi Sector

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Virtus Multi Sector Short has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Virtus Multi-sector 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 Virtus Multi-sector

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

The idea behind Western Asset Total and Virtus Multi Sector Short 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.