Correlation Between Western Assets and Franklin New
Can any of the company-specific risk be diversified away by investing in both Western Assets and Franklin New 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 Assets and Franklin New into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Western Assets Emerging and Franklin New York, you can compare the effects of market volatilities on Western Assets and Franklin New 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 Assets with a short position of Franklin New. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Assets and Franklin New.
Diversification Opportunities for Western Assets and Franklin New
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Western and Franklin is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Western Assets Emerging and Franklin New York in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin New York and Western Assets 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 Assets Emerging are associated (or correlated) with Franklin New. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin New York has no effect on the direction of Western Assets i.e., Western Assets and Franklin New go up and down completely randomly.
Pair Corralation between Western Assets and Franklin New
Assuming the 90 days horizon Western Assets Emerging is expected to under-perform the Franklin New. In addition to that, Western Assets is 1.62 times more volatile than Franklin New York. It trades about -0.05 of its total potential returns per unit of risk. Franklin New York is currently generating about -0.03 per unit of volatility. If you would invest 1,073 in Franklin New York on October 20, 2024 and sell it today you would lose (5.00) from holding Franklin New York or give up 0.47% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Western Assets Emerging vs. Franklin New York
Performance |
Timeline |
Western Assets Emerging |
Franklin New York |
Western Assets and Franklin New Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Western Assets and Franklin New
The main advantage of trading using opposite Western Assets and Franklin New positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Assets position performs unexpectedly, Franklin New 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 Franklin New will offset losses from the drop in Franklin New's long position.Western Assets vs. Angel Oak Financial | ||
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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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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