Correlation Between Western Assets and T Rowe

Can any of the company-specific risk be diversified away by investing in both Western Assets and T Rowe 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 T Rowe 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 T Rowe Price, you can compare the effects of market volatilities on Western Assets and T Rowe 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 T Rowe. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Assets and T Rowe.

Diversification Opportunities for Western Assets and T Rowe

0.27

Correlation Coefficient

Western Assets  T Rowe

Modest diversification

The 3 months correlation between Western and PAHIX is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Western Assets Emerging and T Rowe Price in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on T Rowe Price 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 T Rowe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of T Rowe Price has no effect on the direction of Western Assets i.e., Western Assets and T Rowe go up and down completely randomly.

Pair Corralation between Western Assets and T Rowe

Assuming the 90 days horizon Western Assets is expected to generate 1.2 times less return on investment than T Rowe. In addition to that, Western Assets is 1.22 times more volatile than T Rowe Price. It trades about 0.17 of its total potential returns per unit of risk. T Rowe Price is currently generating about 0.24 per unit of volatility. If you would invest  587.00  in T Rowe Price on October 23, 2024 and sell it today you would earn a total of  6.00  from holding T Rowe Price or generate 1.02% return on investment over 90 days.

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

Western Assets Emerging  vs.  T Rowe Price

Western Assets Emerging

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Western Assets Emerging has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental indicators, Western Assets is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

T Rowe Price

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in T Rowe Price are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, T Rowe 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 Assets and T Rowe

The main advantage of trading using opposite Western Assets and T Rowe positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Assets position performs unexpectedly, T Rowe 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 T Rowe will offset losses from the drop in T Rowe's long position.

The idea behind Western Assets Emerging and T Rowe Price 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.