Correlation Between Western Asset and Clarion Partners

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

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

Diversification Opportunities for Western Asset and Clarion Partners

-0.18

Correlation Coefficient

Western Asset  Clarion Partners

Good diversification

The 3 months correlation between Western and Clarion is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset Municipal and Clarion Partners Real in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Clarion Partners Real 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 Municipal are associated (or correlated) with Clarion Partners. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Clarion Partners Real has no effect on the direction of Western Asset i.e., Western Asset and Clarion Partners go up and down completely randomly.

Pair Corralation between Western Asset and Clarion Partners

Assuming the 90 days horizon Western Asset is expected to generate 120.0 times less return on investment than Clarion Partners. In addition to that, Western Asset is 4.45 times more volatile than Clarion Partners Real. It trades about 0.0 of its total potential returns per unit of risk. Clarion Partners Real is currently generating about 0.48 per unit of volatility. If you would invest  1,157  in Clarion Partners Real on October 23, 2024 and sell it today you would earn a total of  5.00  from holding Clarion Partners Real or generate 0.43% return on investment over 90 days.

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

Western Asset Municipal  vs.  Clarion Partners Real

Western Asset Municipal

Risk-Adjusted Performance

0 of 100

Very Weak

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

Clarion Partners Real

Risk-Adjusted Performance

34 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Clarion Partners Real are ranked lower than 34 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Clarion Partners 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 Clarion Partners

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

The idea behind Western Asset Municipal and Clarion Partners Real 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.