Correlation Between Western Asset and Eaton Vance

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

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

Diversification Opportunities for Western Asset and Eaton Vance

0.62

Correlation Coefficient

Western Asset  Eaton Vance

Poor diversification

The 3 months correlation between Western and Eaton is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset High and Eaton Vance Municipal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eaton Vance Municipal 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 High are associated (or correlated) with Eaton Vance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eaton Vance Municipal has no effect on the direction of Western Asset i.e., Western Asset and Eaton Vance go up and down completely randomly.

Pair Corralation between Western Asset and Eaton Vance

Assuming the 90 days horizon Western Asset High is expected to generate 1.0 times more return on investment than Eaton Vance. However, Western Asset is 1.0 times more volatile than Eaton Vance Municipal. It trades about 0.17 of its potential returns per unit of risk. Eaton Vance Municipal is currently generating about 0.06 per unit of risk. If you would invest  644.00  in Western Asset High on October 22, 2024 and sell it today you would earn a total of  58.00  from holding Western Asset High or generate 9.01% return on investment over 90 days.

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

Western Asset High  vs.  Eaton Vance Municipal

Western Asset High

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Western Asset High are ranked lower than 9 (%) 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.

Eaton Vance Municipal

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eaton Vance Municipal has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Eaton Vance 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 Eaton Vance

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

The idea behind Western Asset High and Eaton Vance Municipal 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..