Correlation Between Western Asset and Federated Institutional
Can any of the company-specific risk be diversified away by investing in both Western Asset and Federated Institutional 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 Federated Institutional 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 Federated Institutional High, you can compare the effects of market volatilities on Western Asset and Federated Institutional 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 Federated Institutional. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Asset and Federated Institutional.
Diversification Opportunities for Western Asset and Federated Institutional
0.93 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Western and Federated is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset High and Federated Institutional High in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federated Institutional 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 Federated Institutional. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federated Institutional has no effect on the direction of Western Asset i.e., Western Asset and Federated Institutional go up and down completely randomly.
Pair Corralation between Western Asset and Federated Institutional
Assuming the 90 days horizon Western Asset High is expected to generate 1.16 times more return on investment than Federated Institutional. However, Western Asset is 1.16 times more volatile than Federated Institutional High. It trades about 0.2 of its potential returns per unit of risk. Federated Institutional High is currently generating about 0.14 per unit of risk. If you would invest 693.00 in Western Asset High on September 3, 2024 and sell it today you would earn a total of 15.00 from holding Western Asset High or generate 2.16% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Western Asset High vs. Federated Institutional High
Performance |
Timeline |
Western Asset High |
Federated Institutional |
Western Asset and Federated Institutional Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Western Asset and Federated Institutional
The main advantage of trading using opposite Western Asset and Federated Institutional positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Asset position performs unexpectedly, Federated Institutional 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 Federated Institutional will offset losses from the drop in Federated Institutional's long position.Western Asset vs. Oklahoma College Savings | Western Asset vs. Massmutual Select Diversified | Western Asset vs. Jpmorgan Emerging Markets | Western Asset vs. Locorr Market Trend |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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